BS in Agricultural Business
This study was undertaken to determine if it would be financially feasible for Altamura Winery to build and operate a wine tasting room in Napa Valley over the course of a 30 year period.
This report used a feasibility study to examine the investment of the tasting room. The study used the cost approach of valuation to value the construction costs. Then capital budgeting was used as a method to determine if the tasting room should be constructed. The capital budgeting methods of this study include the use of a cash flow budget, break-even analysis, and a net present value analysis of the investment using different variables to complete a sensitivity analysis. The sensitivity analysis examined changes in the interest rate, quantity of wine sold in the tasting room, margin per bottle of wine sold, and variable costs.
Under the set variables, building the tasting room proved to be financially feasible, resulting in a net present value of $3,663,670.88. A great majority of the sensitivity analyses resulted in positive net present values. To break-even on the investment, Altamura Winery must sell 317.28 cases of wine each year. Under these circumstances, and even with some variations in key variables, building the tasting room would be a financially feasible investment for Altamura Winery.