17C) A farmer is planning on investing in land with real net returns of $11.11 p
ID: 2794852 • Letter: 1
Question
17C)
A farmer is planning on investing in land with real net returns of $11.11 per acre and assuming these real returns will increase by 5.49% each year. The marginal tax rate is 19.56% and the inflation rate is 3.37%. This farmer is going to sell this piece of land in 3 years.
(i) Calculate the real net return at the end of year 2.
a. $12.37 b. $11.88
c. $13.17 d. $15.89
e. None of the answers are correct
Enter Response Here:
(ii) Calculate the nominal net return at the end of year 3.
a. $12.78 b. $14.41
c. $15.62 d. $13.46
e. None of the answers are correct
Enter Response Here:
(iii) Calculate the after-tax nominal net return at the end of year 3.
a. $14.41 b. $11.59
c. $12.23 d. $13.86
e. None of the answers are correct
Enter Response Here:
Explanation / Answer
(i) Calculate the real net return at the end of year 2.
a. $12.37
(ii) Calculate the nominal net return at the end of year 3
b. $14.41
(iii) Calculate the after-tax nominal net return at the end of year 3.
b. $11.59
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