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Suppose There are three farmers (Farmer A and Farmer B and Farmer C)

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Suppose There are three farmers (Farmer A and Farmer B and Farmer C). The current zoning allows the land to be used for any purpose. Farmer A has chosen Pig Farming. A Pig Farm will earn $50,000 profit, every year, forever.;a. Assume the interest rate is 8% per year. Using a present value equation--;(PV = Y/(1+r)n;What is the Pig Farm worth? You must make some investment assumptions?please state your assumptions.;b. Suppose the next best use of Farmer A?s property is residential, where it could earn $20,000 per year. What is the minimum one-time payment Farmer A would accept to agree to restrict his land for residential use forever?;c. Why would Farmer B agree to pay 60% of this cost (from question 14-b) and Farmer C would on-ly pay 40%?

 

Paper#22928 | Written in 18-Jul-2015

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