-Lease vs. buy decision? Capital equipment is necessary for Granny’s Greenhouse to operate, the actual greenhouse. The greenhouse will have its own heating and cooling features to maintain a steady growing temperature. The cooling system works by running water down the glass panes that have fans blowing air on the water to evaporate, thus cooling the interior. (Priest, 2013) Additional equipment will include computers, pumps, tanks, etc. The total cost is $150 thousand financed at 6% which will fall under an operating budget expense. The financing is a 5 year lease with a zero buyout at the end; which is essentially a loan because even though it is structured as a lease, Granny’s Greenhouse will own the equipment at the end of the lease. (Priest, 2013) A net present value analysis was not conducted to make this decision. Necessity and high margins has given the owner and the bank reason to finance the equipment. However, Section 179 was the deal maker. Part of the “fiscal cliff” bill recently passed included the extension of Section 179 Deduction limits. (The section 179 deduction, 2013) Under Section 179 businesses can depreciate the purchase of capital equipment up to $2 million. (The section 179 deduction, 2013) This is a huge deduction and makes the deal an obvious one.
-Do you require new personnel?
Additional personnel will be necessary for Granny’s Greenhouse. Jobs will include a Greenhouse Technician, a yearly laborer and a seasonal laborer. The Greenhouse Technician will be in charge of when to plant seeds and counting the sprouting tomatoes to determine the percentage of germination, setting up laboratory and field equipment, monitoring temperatures, preparing summaries and reports of production, and supervising the laborers. The laborers will act as assistants to the Greenhouse Technician. (Priest, 2013)
-How will you fund this