A farmer couple has a chance to rent some farmland for $300 per acre. They put together the following budget (per tillable acre). Show your work.

Expected annual gross income from crops $830

Expected input costs (seed, fertilizer, pesticides, drying) $250

Machinery and labor costs $180

Cash rent $300

a. How much is their expected profit per acre if they cash rent the farm?

$________/tillable acre

b. How much is their expected profit per acre under a traditional 50-50 crop share lease?

$________/tillable acre

c. How much would their expected profit per acre be if they rented the land on a flexible cash lease where the base rent is $225, and a bonus equal to 40% of the gross income over $700 is added?

$________/ tillable acre

d. What is the maximum amount they could pay for rent (calculate the tenants residual)?

$________/ tillable acre

e. How much would the land be worth using the income approach to valuing land, if the discount rate is 4.5% and ownership costs (property taxes and upkeep) in addition to production costs are $40 per acre?

$________/ tillable acre

f. How much would their net cash flow from the land be if they bought it with a $6,000 per acre loan and their annual payment was $350 per acre?

$________/ tillable acre