Farmer Sam's farm is in a hilly section of the state. Erosion has always been a problem, but in recent years it has caused a decline in yields. Over the next 5 years, he expects that his profits per acre will fall as seen in the following table. He is considering putting in terraces, which would stop the erosion and hold profits at $10 per acre, If he doesn't pay for terracing, he will put the money in the bank and earn 3% interest per year. What is the present value of profits per acre with and without terracing? Show your math or spreadsheet calculations for each of the 5 years. Year Profits per Acre WITHOUT Terracing Profits per Acre WITH Terracing $10 1 $10 $9 $10 3 $8 $10 4 $7 $10 $6 $10

Farmer Sam's farm is in a hilly section of the state. Erosion has always been a problem, but in recent years it has caused a decline in yields. Over the next 5 years, he expects that his profits per acre will fall as seen in the following table. He is considering putting in terraces, which would stop the erosion and hold profits at $10 per acre, If he doesn't pay for terracing, he will put the money in the bank and earn 3% interest per year. What is the present value of profits per acre with and without terracing? Show your math or spreadsheet calculations for each of the 5 years. Year Profits per Acre WITHOUT Terracing Profits per Acre WITH Terracing $10 1 $10 $9 $10 3 $8 $10 4 $7 $10 $6 $10

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Farmer Sam's farm is in a hilly section of the state. Erosion has always been a problem, but in recent years it has
caused a decline in yields. Over the next 5 years, he expects that his profits per acre will fall as seen in the following
table. He is considering putting in terraces, which would stop the erosion and hold profits at $10 per acre. If he
doesn't pay for terracing, he will put the money in the bank and earn 3% interest per year.
What is the present value of profits per acre with and without terracing? Show your math or spreadsheet
calculations for each of the 5 years.
Year
Profits per Acre
WITHOUT Terracing
Profits per Acre WITH
Terracing
$10
1
$10
$9
$10
3
$8
$10
4
$7
$10
$6
$10

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