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A farmer sows a certain crop. It costs $210,000 to buy the seed, prepare the ground, and sow the crop. In one year's time it
A farmer sows a certain crop. It costs $210,000 to buy the seed, prepare the ground, and sow the crop. In one year's time it will cost $175,300 to harvest the crop. The farmer's best estimate is that the crop will be worth $400,000 in one year. The farmer can borrow and lend at an interest rateis 7%. Part A)The net present value (NPV) ofthe farmer's decision to proceed with this investment is closest to which of the following? What price would the farmer need to pay for the forward agreement described in Part B such that the NPV of her overall farming investment would be unchanged from that calculated in Part A
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