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A farmer has a two crop planting patterns, each of which takes two years from planting to sales. In plan A= he would get cash
A farmer has a two crop planting patterns, each of which takes two years from planting to sales.
In plan A= he would get cash flows of $10,000 every two years, starting 2 years from today (years 2, 4, 6, etc).
In plan B= he would get cash flows of $X every alternate year, beginning in year 3 (years 3, 5, 7, etc).
If the present value of the crops from the two planting plans is the same, find X. Assume that he expects to continue farming forever? Also assume his required rate of return is 8% per year.
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