Order Your Paper From the most reliable Essay writing Service. 

.

 



Question: Investing in a tractor  A cotton farmer is considering investing in another tractor. The tractor ...

Show transcribed image text Investing in a tractor A cotton farmer is considering investing in another tractor. The tractor costs $350,000 and will last for six years. After six years, the tractor becomes outdated and the tractor's manufacturer buys it back for $30,000. The new tractor will increase the farmer's profits by $70,000 each year the farmer has the tractor (six years). a. If the farmer's discount rate (the rate used to discount future payoffs) is 6%, the net present value of this investment is rounded to the nearest whole dollar. You can assume the farmer is certain of the profits described above and the discount rate (there is no uncertainty). b. Should the farmer invest in the new tractor?

Investing in a tractor A cotton farmer is considering investing in another tractor. The tractor costs $350,000 and will last for six years. After six years, the tractor becomes outdated and the tractor's manufacturer buys it back for $30,000. The new tractor will increase the farmer's profits by $70,000 each year the farmer has the tractor (six years). a. If the farmer's discount rate (the rate used to discount future payoffs) is 6%, the net present value of this investment is rounded to the nearest whole dollar. You can assume the farmer is certain of the profits described above and the discount rate (there is no uncertainty). b. Should the farmer invest in the new tractor?