Question

Please answer all parts

The market value of honey fruit plant in year t is V(t) = 200t - 5t?! (a) At what year is the honey fruit plant most valuable? Thus, based on this answer, when do you suggest the plant to be harvested? (b) Assume that plant can be harvested only one time. If the real interest is 3%, when the owner should harvest the plant? (c) If the real interest is 5%, when the owner should harvest the plant? Compare your results from previous two parts and comment on your findings. Is this the result as you expected? Explain. (d) Assume the real interest rate is 3%. i. What will be the value of the honey fruit plant at time when it is most valuable (calculated in part a)? li. What will be the value of the honey fruit plant at the time of op timal harvest? What is the value of the asset if owner invests the proceedings from harvest into bank account that pays 3% annual rate for the rest of period until years you found in part a)? iii. Compare previous two parts and advise if it is indeed good to harvest plant at time you calculated in part (b). (e) Some honey fruit connoisseurs want to buy this plant. What is the highest price the owner could charge for the plant now? k-heln/marron

Answer 1

оооо 23 en 1911 20th year ( 25 maxim 2006 the GRL1952.13 ato Oh y erido) The Valaxia in 12th SALVADOR hatit valab Anas) Ma Valuboney planta yous 2001 - 5 Ne si t e vahuone ty_CARDS anithyan Vali - 20 IRS -1201930 en 19th THUM 200X19-5419 = 300 - 1905 1995 Osts 10th yeah 200X20 - 5/20 400 - 2000 2000 Os 21st you's 200XL - 522 - 9200 - 2205 - 1995 es gnd year 20022-512) = 49460-24201986 This shows value of money plant 176) Agusting plant can be harada Elyane H ünerul w = 301 The autner should harvest the plant Mihin maximum PRU PV Lan Val LEVINE 20 boyu Run to let 4 E AN ond the Vol. La Melody Moth Sumtok to the cusner would gaind whert he u marmed that maximum URL pat voluto Que Les 15th MSAN Vali o plam 10x15 - 515)

October FRITI where r = interest rate. n = number of ye So, value of 1875 in year - 18 75 C1 +0.03)15 = 11 68 For 14th year, & Value = 1820 - PV = 1820 - It 0.03)14 = 1203 For 13th year, Value of plant = 1755 SAT PV = 1755 19 22073 (1803)'3 = 1195 PV = 1820 14th year the present ng and above 14th value yeard Hence wested e rket value would she mel would mean 1203 le vo should end et 18.20 which het year. present October

2015 287-078 is 5% October 14 MON When real interest rate the cuener should harvest un 12th year because rest the plan In 11th year 95 and PV = 1595 - 932 (1005)16 In 13th year, V- 1755 and PV = 931| But in 12th year, V = 1680 15 Teman E TUE 11 and PV = 935 which is - maximum see here that as the rate est freal) is increasing, ut is en Cicial for cuener to have alr s bennt earlier since neetharnest s plan the real worth of mancrean a over the time. Wennoney in 288-077 can see here See, we o he was Klugas 37 he 2 14th decrease CLCK. are value to but wh to 5010 PV in 12 present value fulure value o Ural Leded LAX,mum FUE VO

U 2010 (1) The value of the time when aty Und). Asuming the meal Intoxut rate is: Value of the honey wil plant al (calculated in part a is 20th year) (Value) = 2007 - 512 = 200X20- 5(20) 2000 mind Valval (..) At 36% interest rate, the optimal kar would be in the year which gives Fular Value in terms maximum Volu We Calculated in Pooh to I THU 14th year would be that year Se, value of plant in 14th = 2.90x14 - 5142 year 120 hould innert this into bank the poliod until 20th yea Value at 14th year (optimal harnest) - 1880 MULOQuldu 10wt). 182 count that pouys 3% inte est 01. the butidotorest 2 sound in part al. you so n = 6 years (20-14) pvbnih geam) - 18 20 37 pvc 27.0.03)

August FRI 02 214-151 = 1820 (1003) 2 1820X1.19405229653= 2173•17518 = 2173 ane Coon Yes, it is indeed good to harnest plant at time calculated in part (6) According to part (a), plant is most valuable in 20th year (without any real interest being considered) • And according to part (b) the plant should ot be harmated un 14th year (given 3%. - real interest) o It is good to take into account real interest and decide to harnest ecause of inflation and! SAT no tractats prevailing en 3 market. With the passage of time, the real value of money recreases whech Hathon rate. Rs 100 us knauen as in worth Tesser un worth today would real interest rate the future sincetion allows and then for unflamined, it propitt is bet a loss is determined, it is better! part (b) and harvest the - Plane on 14th year. I to follow par SUN 04

Enter July 20 20 207-158 26 FRII Ansle bo ere bence, the optimal harnest would be in the 14the year when value of plant is 18 20 and its present valu bring 1203 (calculated in part Bg the owner Could change this as the highest price for plant now e 27 SAT! 208-157 28 SUN