Capital Expenditure Problem: The Farmer and the Cow [25 points] A farmer is considering whether to buy another cow to add to his milk herd. The cost of the cow is $600 and he knows the following things that will enter into his decision whether to purchase this new cow or not (which for him is like buying a new piece of capital equipment): The farmer is working with an interest rate of (discount rate) of 8%. He can sell the milik wholesale from the cow for $1.00 per gallon. He knows that the cow can generate the following output. - Ist year - 400 gallons of milk - 2nd year - 200 gallons of millk - 3rdyear - 100 gallons of milk - 3rdyear - salvage value of cow =$50.00 Answer the following: 1. Show a time line for the potential purchase of this cow 2. What is the NPV inet present valuel from this cow : 5 . 3. Bsed on your answer to 21, should the farmer purctuse the cow? Yes or No 4. It the discount rate were 6%, should he then purchase the cow Yes or No 5. What would the NPV (net present value) be in this case (60\% discount rate) 5