Outline
Sweet Dreams is a well-established and successful wine producer with its vineyard located in the Gold Coast hinterland. The vineyardhas 50 hectares of wine producing vines that, on average, produce5,000 kilograms of grapes per hectare per annum. Their modern processing facilities yield approximately 645 litres of wine per 1,000 kilograms of grapes. All wine is sold in the year of harvest and Sweet Dreams achieves an average wholesale price of $6.90 per bottle (note that each bottle of wine is 0.75 litres) across their wine varieties.
After many years of operations, the winery's grape harvester needs to be replaced. The production manager has investigated several harvesters and has narrowed the choice to two specific models:a Self-Propelling Harvester and a Tow-Behind Harvester. Relative to the harvester being replaced, both these models are more efficient in that theyreduce crop wastageand have lower running costs.An initial analysis of the two harvesters conducted by the production manager indicates that the Tow-Behind Harvester should be purchased as its capital investment and overhaul costs are much lower than those for the Self-Propelling Harvester.
The vineyard's owner, Mr. Bob, is not satisfied with the analysis as he believes it is too simplistic. As such, he has provided you with some detailed information related to the decision to replace the harvester and has asked that you complete the following task.
Task
Provide a detailed financial analysis of both harvesters,noting that Mr. Bob plans to replace the chosen piece of machinery at the end of its life.In addition, you are to write a detailed but concise report relating to the analysis and provide a recommendation on which harvester to purchase so that Mr.Bob can discuss this with the production manager.In completing this task, Mr. Bob has specifically requested the following:
- The financial analysis is to be completed in Excel. The file is to be easily adjustable for different scenarios(interactive spreadsheet) and you must use the 'Analysis of Harvesters.xlsx' sheet provided as your input sheet.
- The analysis of each piece of machinery should be conducted on separate sheets.
- The reportis tobe short (600 words + 20% tolerance) and written in a manner that can be understood by a person with limited knowledge of financial analytical tools.It should also have the following sections:
o Summary
o Methodology - this section must explain and justify the methodology chosen for the financial analysis. NOTE: Do not list/describe the steps of the analysis.
o Recommendations and Limitations.