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Suppose that a parcel of farmland is selling for $5,000/acre. You know that the land is currently returning $80 per year (real) for the next
Suppose that a parcel of farmland is selling for $5,000/acre. You know that the land is currently returning $80 per year (real) for the next 15 years before it will be converted to a non-agricultural use. If you have a real discount rate of 4%, what is the minimum level of real annual net returns to the non-agricultural use that would justify you making the purchase?
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