Alpaca Business Overview of Scenario Like Many Essay

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Alpaca Business

Overview of Scenario

Like many people who have retirement, investments that are diminishing in return, Betty Parks decided to do something tangible to increase her yields for retirement. Betty is 49, and has at least 16 more years to increase her nest egg. Betty's view is that the Alpaca, a South-American Llama-like creature, will be a low-maintenance and higher yield way to increase her funds. Unlike the Llama, Alpacas are smaller, very low-maintenance, and are set up for two major ways to earn money: 1) their fiber (coat) which is similar to wool but in many cases, rarer and of higher quality, and; 2) breeding and sale, from $5-8K per off spring. Interestingly, Alpacas require far less food than other animals their size, and are well able to graze on hay and grasses as long as their field is rotated. In fact, the animal is so efficient a producer that 10 animals per acre is a reasonable land investment as long as waste is kept away from the herd. The investment ratio for Alpacas is variable, depending on their color and the quality of their fiber, which is then dependent upon the quality of their diet. Typically, adult alpacas are shorn once per year in the Spring, with each sharing producing 5-10 pounds of fiber per alpaca, which might be up to 90 ounces of first-quality fiber and then the rest mid-low quality.

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To average, Betty could use a ratio of 33/33/33 (High, Medium, Low) per animal and likely be safe. Average prices are $4/oz for High Grade, $3.50/oz for Medium and $2.50/oz for low grade. If an average adult produces 7.5# per annum, we would have:

Weight

Price/oz

Total

High Grade

2.5# or 40 oz.

$4.00

$160.00

Med-Grade

2.5# or 40 oz.

$3.50

$140.00

Low Grade

2.5# or 40 oz.

$2.50

$100.00

This means that, on average, each adult Alpaca is worth $400/annum to Betty. She purchased 7 animals at $56/K, or about $8K each. Thus, from an investment, the return is $400/annum on $8,000, or about 5% per annum, a little more when one considered tax breaks, tax and inflation rates, and future returns.

Risks & Rewards

There are risks with living creatures: animals could die, sicken, require much more maintenance, etc. Betty could become ill and not be able to care for the small herd, requiring outlay of money for labor. However, at this rate of return, it would take about 20 years per Adult to return her initial outlay. However, a mixed strategy of combining a herd of 10 animals on 1 acre, selling the fiber at $400/adult or $4,000 per annum, culling the herds for sales of breeding males or rarer color females (for hypothetical purposes, 4 per year.....

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