3. A hog operation expansion will cost $30,000 and create cash flows of $6,000, $7,000, $7,500, $7,000, and $7,000, respectively, in years one through five. Inflation is 6% and the time preference rate is 2%.

a. Is this expansion desirable?

b. What investment cost would change your answer to part (a)?

c. What time preference rate would change you answer to part (a)?

d. If the risk adjustment factors for years zero through five are 1.0, 0.95, 0.90, 0.85, 0.80, 0.75, respectively, what is the certainty-equivalent NPV?