1. Evaluating your Options for Growing Patented, Proprietary Varieties December 6, 2000 Washington State Hort Association David Marshall

2. Bottom Line Question How much more money will this new variety have to return to me in order to JUSTIFY additional royalty costs?

3. Planning is Needed 1. Sharpen the MIND and 2. Sharpen the PENCIL

4. Supply Control Systems Base System Royalty per tree $0.00 Royalty per box $0.00 Percent of sales 0.0% Sales Charge $0.40

5. Supply Control Systems Base SystemSystem A Royalty per tree $0.00$0.50 Royalty per box $0.00$0.50 Percent of sales 0.0% Sales Charge $0.40

6. Supply Control Systems Base SystemSystem ASystem B Royalty per tree $0.00$0.50$1.25 Royalty per box $0.00$0.50$1.25 Percent of sales 0.0% Sales Charge $0.40

7. Supply Control Systems Base SystemSystem ASystem BSystem C Royalty per tree $0.00$0.50$1.25 $2000 Per acre Royalty per box $0.00$0.50$1.25-- Percent of sales 0.0% 11.0% Sales Charge $0.40 --

8. Assumptions 10 Acre plot – 20 year life Land Cost = $3000 per acre. –$210 per acre “rent” at 7% System: 4-wire Vertical Trellis Variety ‘X’ on M9 root Spacing 12’ x 4’ –907.5 trees per acre THE ORCHARD WORKS!

9. Assumptions: Yield Curve

10. Establishment Costs $5.65 per tree

11. Operating Expenses

12. Return Statement: Sales 100 bins 65% of packs Grade A

13. Return Statement: Net Returns 18 packs per bin 41 lbs per pack 900 lbs per bin 18% culls 65% of packs Grade A

14. Inflows and Outflows (Base)

15. Cash Flow (Base Scenario) Internal Rate of Return: 20.0%

16. Results: Internal Rate of Return Price for Top Grade Base SystemSystem ASystem BSystem C $30 / box 20.0%18.8%17.0%14.6% Compare the computed IRR with your Required Rate of Return

17. Results: Internal Rate of Return Price for Top Grade Base SystemSystem ASystem BSystem C $30 / box 20.0%18.8%17.0%14.6% $27 / box 15.6%14.2%12.2%10.1% Compare the computed IRR with your Required Rate of Return

18. Results: Internal Rate of Return Price for Top Grade Base SystemSystem ASystem BSystem C $30 / box 20.0%18.8%17.0%14.6% $27 / box 15.6%14.2%12.2%10.1% $24 / box 10.1%8.6%6.1%4.3% Compare the computed IRR with your Required Rate of Return

19. Results: Net Return per Bin Price for Top Grade Base SystemSystem ASystem BSystem C $30 / box $299$290$276$258 $27 / box $255$246$233$220 $24 / box $212$203$190$181

20. Required Rate of Return = 15% Base SystemSystem ASystem BSystem C

21. Required Rate of Return = 15% Base SystemSystem ASystem BSystem C Return / bin before any royalty $251$262$280$303 +$11+$29+$52

22. Required Rate of Return = 15% Base SystemSystem ASystem BSystem C Return / bin before any royalty $251$262$280$303 +$11+$29+$52 Top Grade f.o.b. $26.66$27.47$28.68$30.32 +0.81+2.02+3.66

23. Required Rate of Return = 20% Base SystemSystem ASystem BSystem C Return / bin before any royalty $299$312$331$363 +$13+$32+$64 Top Grade f.o.b. $30.00$30.89$32.22$34.46 +0.89+2.22+4.46

24. Contact Information FOR MORE INFO... Copies of this material are available in the back. This Power Point presentation can be downloaded at: David Marshall 408 North First Street Yakima, WA 98901 509-453-4851 dwmarshall@agrimgt.com http://www.agrimgt.com/newsletters.htm