How does the discount rate affect the farmer's decision of whether or not to utilize erosion control methods?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Our agriculture industry is incredibly important since it provides our food. Unfortunately, some of the practices currently
being used in the industry are not very sustainable from an environmental perspective. As our population grows, and so
does our food demand, it is becoming increasingly important that we manage this industry in a sustainable way.
Assume a local farmer normally brings in crop revenues of $100,000/year. Erosion causes a 1% loss in yield each year.
How does the discount rate affect the farmer's decision of whether or not to utilize erosion control methods?
Transcribed Image Text:Our agriculture industry is incredibly important since it provides our food. Unfortunately, some of the practices currently being used in the industry are not very sustainable from an environmental perspective. As our population grows, and so does our food demand, it is becoming increasingly important that we manage this industry in a sustainable way. Assume a local farmer normally brings in crop revenues of $100,000/year. Erosion causes a 1% loss in yield each year. How does the discount rate affect the farmer's decision of whether or not to utilize erosion control methods?
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