Business, 15.07.2021 16:30 slippedsumo

Suppose a farmer is considering the purchase of additional farmland. It is believed that the operating revenue per acre of land per year will be $686 and operating expenses will be $447 in present dollars. The inflation rate is expected to be 7% Assume that the marginal tax rate is 16% and that this farmer requires at least an 8% pre-tax, risk free return on capital. (i) Calculate the nominal before-tax net returns at the end of year 1.
a. $237.83
b. $239.00
c. $296.65
d. $255.73
e. None of the answers are correct
(ii) Calculate the nominal after-tax net returns at the end of year 2.
a. $266.63
b. $214.81
c. $213.76
d. $229.85
e. None of the answers are correct
(iii) Calculate the nominal after-tax net returns at the end of year 3.
a. $285.29
b. $228.72
c. $245.94
d. $229.85

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Suppose a farmer is considering the purchase of additional farmland. It is believed that the operati...

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