b. Based on present worth analysis, is the proposed investment profitable if production cost increases by a rate of 5% per year as a result of wage increase? Justify your answer. (15 marks)

Question 4

The CEO of Asempa farms limited is considering whether to plant this years yam with a fertilizer or go organic (i.e. without fertilizer). In case of using a fertilizer, 10kg of either the Platinum or Standard type fertilizer would be needed at the start of the planting year. The Platinum type is GH1000 per kilogram and could lead to a high yield of 30 tons or a moderate yield of 20 tons of yam at the end of the year. The Standard type is GH800 per kilogram and could also lead to a

Page 2 of 3 Examiners: Dr. A. Afful-Dadzie, and Dr. A. Karimu

high yield of 15 tons or a moderate yield of 10 tons of yam at the end of the year. The Standard has fewer chemicals and would lead to tastier yam that sells for a higher price than that of Platinum. There is a probability of 0.7 that high yield would be recorded at the end of the year.

Market price for yam is uncertain and depends on the type as well as the volume of yam on the market. Generally, a year of high yield results in higher volume whiles a year of moderate yield leads to moderate volume of yam on the market. Even then, there is 60-40 chance that yam from the Platinum fertilizer could sell for GH2000 or GH2400 per ton in times of high yield, and GH3000 or GH3500 per ton in times of moderate yield. The Standard fertilizer yam has a 40- 60 chance of selling for GH4000 or G