Profitability Assessment of Technical Investments of a Pig Farm

Abstract

In the pig farm of an agricultural ltd. a new house for pregnant sows and a house for piglets have been built, also the programme included the renovation of the house for fattening pigs. We set up three hypotheses on the basis of which we carried out some examination on the three possible ways of financing the investment. Our hypotheses were: Hypothesis 1: the investment will pay off within the examined period of ten years, if it is financed by the firm from its own sources, state subsidies and a bank loan. Hypothesis 2: the investment is economically feasible, so it will pay off within the given period, if it is financed by the firm from its own sources and a bank loan. Hypothesis 3: the investment will pay off economically in the examined ten years, provided it is financed by the firm from its own sources and state subsidies. We carried out our calculations using economic indicators.
Our calculations were made over a 10-year period in order to compare the results, as the maturity of the loan is 10 years. The annual yield expected by the investors is 8%. As a result of our researches, hypotheses 1 and 3 have been supported, while we had to reject hypothesis 2. Eventually, the firm implemented these investments from its own sources, a non-repayable state subsidy and a commercial bank loan.