Asked by Beverly Chafton on Jul 23, 2024
Verified
Refer to Table 11.4. If the interest rate is 22%, then the farmer will only
A) buy the bookkeeping software.
B) buy the bookkeeping software and the grain storage tanks.
C) buy the tractor and the irrigation system.
D) buy the tractor.
Irrigation System
A network of supplies and managements used to provide water to agricultural land to aid in the growing of crops.
Total Investment
The complete amount of money allocated for the purchase of new assets, expansion of operations, or other investments within a particular period.
Expected Rate Of Return
The projected return on an investment, considering both the probability of gains and the potential for losses, over a specific time period.
- Compute the anticipated rate of return and its importance in investment decision-making.
- Familiarize oneself with the economic rationale that influences the choice of projects based on their forecasted rates of return compared with interest rates.
Verified Answer
DP
Deepesh PatidarJul 29, 2024
Final Answer :
C
Explanation :
The farmer will only invest in projects with an expected rate of return higher than the interest rate of 22%. The tractor and the irrigation system have expected rates of return of 24% and 30%, respectively, which are both higher than 22%.
Learning Objectives
- Compute the anticipated rate of return and its importance in investment decision-making.
- Familiarize oneself with the economic rationale that influences the choice of projects based on their forecasted rates of return compared with interest rates.