A Farm Must Decide Whether or Not to Purchase a New

question 33

Multiple Choice

A farm must decide whether or not to purchase a new tractor.The tractor will reduce costs by $2,000 in the first year,$2,500 in the second,and $3,000 in the third and final year of usefulness.The tractor costs $9,000 today,while the above cost savings will be realized at the end of each year.If the interest rate is 7 percent,what is the net present value of purchasing the tractor?

• A) $6,764
• B) $9,362
• C) $18,362
• D) None of the statements associated with this question are correct.

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Definitions:

Microlending

The provision of small loans to entrepreneurs and small businesses lacking access to banking and related services.

Human Capital

The knowledge and skills that make a person productive.

Aggregate Demand

Aggregate demand represents the total demand for all goods and services within a country's economy at a given overall price level and in a given time period.

Production Possibilities Curve

A curve showing the different combinations of two goods or services that can be produced in a full-employment, full-production economy where the available supplies of resources and technology are fixed.