Purpose

The purpose of this study is to estimate the amount of cash flow deficit, if any, needed to maintain the operating costs and service debt of a startup cow–calf enterprise. The study compares long-term profitability and risk between starting small and building a herd to full carrying capacity or by starting at desired herd capacity.

Design/methodology/approach

A dynamic cattle growth model was developed to capture expanding and maintaining the desired herd size. Discounted cash flow (DCF) models over a 15-year period were calculated to estimate net present value (NPV), modified internal rate of return (MIRR) and cash flow deficit to keep the business operating and service debt. Simulation analyses were conducted considering price and production risk.

Findings

Starting at the desired herd size was preferred, according to NPV/MIRR and cash flow deficit, but the differences were not substantial. Assuming the operation is liquidated at book values, there was a 36.3% probability of this enterprise having a zero or positive NPV. If the conservative terminal value assumption is relaxed up to feasible market values, the cow–calf enterprise is economically attractive at an estimated 2.4% opportunity cost of capital. However, the producer would experience a cash flow deficit during the first seven years, which was simulated to be $14,892 and $15,985 annual for both strategies.

Originality/value

Innovative methods used in this study include varying the annual opportunity cost of capital as a function of financing decisions, stochastic prices by cattle type and stochastic weaning weights that are a function of a dynamic cattle model.

中文翻译：

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初生牛犊生产者的盈利能力、风险和现金流赤字

目的

本研究的目的是估计维持一家初创牛犊企业的运营成本和服务债务所需的现金流赤字量（如果有的话）。该研究比较了从小规模开始和建立一个完全承载能力的畜群或从所需的畜群容量开始之间的长期盈利能力和风险。

设计/方法/方法

开发了一个动态牛生长模型来捕捉扩大和维持所需的牛群规模。计算了 15 年期间的贴现现金流 (DCF) 模型，以估计净现值 (NPV)、修正内部收益率 (MIRR) 和现金流赤字，以保持业务运营和服务债务。考虑到价格和生产风险进行了模拟分析。

发现

根据 NPV/MIRR 和现金流赤字，首选从所需的畜群规模开始，但差异并不大。假设该业务按账面价值清算，该企业的 NPV 为零或正值的概率为 36.3%。如果将保守的终值假设放宽到可行的市场价值，则牛小牛企业在估计资本机会成本为 2.4% 时具有经济吸引力。但是，生产商在前七年会遇到现金流赤字，这两种策略的年现金流分别为 14,892 美元和 15,985 美元。

原创性/价值

本研究中使用的创新方法包括根据融资决策改变资本的年度机会成本、牛类型的随机价格和作为动态牛模型函数的随机断奶权重。