A farmer has the opportunity to purchase an advanced guidancesystem for precision farming. This is the advertisement: NewOutback MAX Guidance System Outback MAX™ with Outback ConnX™ —introducing the next generation Outback Guidance® system thatredefines simplicity in precision farming. Outback MAX leads theway with simplicity in design and operation, a powerful mappingengine, excellent screen clarity, seamless connectivity, and arugged design that can operate in rough environments—features thatare critical to achieving the benefits of precision farming. Whatmakes MAX the smart choice for you and your business? • Compatiblewith eDriveX™ with eTurns™ - taking advantage of the most preciseand feature rich automated steering available. • Has excellentscreen clarity and rugged design that can operate in roughenvironments • Provides a powerful mapping engine that stacksimagery and data layers • Delivers seamless connectivity via theOutback ConnX data management system to deliver real-time dataaccess and management. The farmer believes that the guidance systemwill add the value of improved farming, more uniform treatments,less driver skill needed and extended hours of operation. Hebelieves improved yields and reduction in operating costs willincrease his profits by $1,200 per year. He plans to keep theGuidance system for 15 years. At the end of 15 years he believes hecan sell it for $300.
(i) Calculate the market value of this investment if the marketrate of return on comparable investments is 16% a.$7,177 b. $6,723c. $1,802 d. $26,616 e. None of the above ENTER RESPONSE HERE:
(ii) Calculate the Net Present Value if the price of thisinvestment is $6000 and the farmer’s required rate of return is 16%(discount rate) and state if this investment is acceptable. a.$1,177; Acceptable b. $20,616; Acceptable c. $723; Acceptable d.-$4,198; Unacceptable e. None of the above ENTER RESPONSE HERE:
(iii) Calculate the yield on this investment if the price ofthis investment is $6,000 and state if this investment isacceptable if the required rate of return is 16%. a. 18.5%;Acceptable b. 11.79%; Acceptable c. 18.8%; Unacceptable d. 8.20%;Unacceptable e. None of the above ENTER RESPONSE HERE:
(iv) After the farmer has used this Guidance system for 15years, he discovers that the increase in profits was only $1,000and the 15 year old guidance system was antiquated and he couldn’tsell it. Given he paid $6,000 for the guidance system, what was thetrue yield? a. 14.8% b. 14.95% c. 12.0% d. 14.5% e. None of theabove
