please show all solutions step by step 34. Mark is considering spending $25,000
ID: 1119540 • Letter: P
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please show all solutions step by step
34. Mark is considering spending $25,000 on a farm tractor that will increase his crop yield and bring additional revemues of S4,000 for each of the next 7 years. Mark should: A) buy the tractor because its benefits of $28,000 outweigh its costs of $25,000 B) buy the tractor because inflation will reduce the value of future cash flows. C) use present discounted value analysis to decide whether the tractor is a good D) not buy the tractor because the payback period extends beyond three years. 35. Tankim has $4,000 in his savings account, which pays an annual interest rate of 2%. The value of his account at the end ofeight years is: A) $4,200 B) $4,686.64 C) $4,640 D) $4,808.16 36. If Vincent puts $344 into his saving account, his account will have grown to $379.26 by the end of two years. A) 3.5% B) 42% C)5% D)7% What is the interest rate earned on Vincent's savings account?Explanation / Answer
34. Option C.
Explanation: The present value of the cash flows should be greater than $25000 initial investment to make the investment profitable. In order to calculate the present value of the cash flows, Mark will have to conduct a present discounted value analysis using a suitable discount factor.
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