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Suppose a farmer requires a pre-tax rate of return of 15%, has a marginal tax rate of 25%, assigns a 2% risk premium to investments,
Suppose a farmer requires a pre-tax rate of return of 15%, has a marginal tax rate of 25%, assigns a 2% risk premium to investments, and expects inflation to be 3% per year over the next 10 years. This farmer calculates the NPV of his new investment to be - $50,000 based on an investment life of 10 years. (i) Calculate the real discount rate. a. 9.47% b. 12.75% c. 7.74% d. None of the answers are correct Enter Response Here: (ii) Calculate the real annuity equivalent. a. $9,492 b. $5,298 c. $7,953 d. None of the answers are correct Enter Response Here: Suppose a farmer requires a pre-tax rate of return of 15%, has a marginal tax rate of 25%, assigns a 2% risk premium to investments, and expects inflation to be 3% per year over the next 10 years. This farmer calculates the NPV of his new investment to be - $50,000 based on an investment life of 10 years. (i) Calculate the real discount rate. a. 9.47% b. 12.75% c. 7.74% d. None of the answers are correct Enter Response Here: (ii) Calculate the real annuity equivalent. a. $9,492 b. $5,298 c. $7,953 d. None of the answers are correct Enter Response Here
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