che purchase of $100$ acres of prime ranch present labor, machinery and breeding livestock. The land is selling acre. Mr$.$ Agirich believes that the operating receipts per acre of land per year will $$450$ and operating expenses will be $$420$ in present dollars. Mr$.$ Agirich expects that the inflation rate will be $3\%$ and operating receipts and expenses per acre will increase at the rate of inflation. The farmer will sell the land in three years and he anticipates that land prices will increase at the rate of inflation $($from a base price of $$400).$ A bank will loan him $$350$ per acre of land and the loan will be fully amortized over $15$ years at $10\%($annual payments$).$ The outstanding balance of the loan will be paid at the end of the third year $($balloon payment$).$ Assume that the marginal tax rate is $30\%$ and that Mr$.$ Agirich requires at least a $6\%$ pre$-$tax, risk$-$free return on capital and a $4\%$ risk premium on projects of comparable risk. $($Do the analysis on a per acre basis.$)$

What is the annual real pre$-$tax Net Returns in the third year?

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What is the annual nominal pre$-$tax Net Returns in the third year?

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What is the annual nominal after$-$tax Net Returns in the third year?

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What is the nominal tax savings from depreciation?

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