You have a chance to buy a plot of rice land that is offered for sale for $5000/ acre. You expect

• - the annual NET returns (revenue minus costs) from rice production to be $400/acre in

  Year 1, and the NET returns to grow slightly faster than inflation over time (3% per year),

• - inflation of 2%,

• - you will own the land for 25 years before selling it,

• - the value of the land for resale will grow at the same rate as inflation (2% annual

  growth).

What is the NPV of this investment if you use a 5% discount rate? After accounting for 3% growth per year in the net returns, what is the net return in year 24? What is the resale value of the land per acre (in Year 25)? What is the NPV of the investment if you add a 3% risk premium (this assumes rice prices may be inconsistent, weather issues could arise, etc.).

*Note: I would need help answering ALL questions asked of in this post please. Thank you!