I planted a 5-acre Christmas tree farm at a density of 1,200 trees per acre. I...

I planted a 5-acre Christmas tree farm at a density of 1,200 trees per acre. I expect to harvest all of the trees in Year 9 (n=9) and plan to sell the trees for $60 each (in constant 2018 dollars – disregarding inflation). Using a real discount rate of 7%, what is the present value of the revenue (a benefit) from the Christmas tree harvest in Year 9? Report your answer as a whole number rounded to the nearest dollar without a dollar sign or comma.

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Expert Solution

Area = 5 acre
Trees per acre = 1200
Total number of trees = 1200 x 5 = 6000 trees

After 9 years, selling price per tree = $60
Total revenue after 9 years = $60 x 6000 = $360000

Real discount rate = 7% p.a.

Present value = $360000 x (1/(1+0.07)⁹)

Present value = $360000 x 1 / 1.838459

Present value = 195816

Answer: 195816

Rahul Sunny answered 2 years ago

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