Imagine a farmer is going to purchase 50 acres of land, the land costs $250,000.

The farmer is going to finance the purchase with $70,000 of equity and $180,000 of debt using a constant payment amortized loan.

The15 yearloan will have monthly payments and carries an annual interest rate of 6%.

Explain to the farmer how this purchase and the farmer's financing choice will impact the farm's annual balance sheet in the short term and long term (5-10 years out),

the farm's annual income statement in the short term and long term, and the farm'scashflow(just focus on the short term).

You can assume that farm land in this area generally increases in value atalowbut steady rate. This is an open ended question although there are certain key points you should raise.

You do not need to make an amortization schedule, but you can if you want to.