What is the net present value of purchasing the land

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Reference no: EM13146514

Assume 100 acres of land was purchased for growing energy crops (shrub willow). The land cost $2,000 per acres to purchase and there are property taxes due each year of $4000 for the 100 acres. The willow costs $1500 per acres to plant (buy the plant, till the ground and the cost for machinery, fuel and labor). The willow takes three years to produce a crop. It costs $400/acre to harvest the willow and sell the biomass. The willow will yield 30 tons of biomass after three years, and the biomass can be sold for $40/ton. What is the net present value of purchasing the land and growing the willow after 12 years? If the price for the willow drops to $25 per ton in year 11, should the farmer harvest the willow in year 12? (and calculate that NPV) Assume a 6% discount rate.

Reference no: EM13146514

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