1) Farmer Ag owns special species of cotton-producing plant that, if left un-harvested grows a bigger bowl of cotton through time. If harvest immediately then NPV, is= $69,000. If he harvests in one year, NPV would increase over the immediate harvest by= 19%. If harvests in= 2 years, NPV would increase of= 15% over that of year 1 and year 3 would generate NPV increase of= 10% over that of year 2. Suppose discount rate of= 11%.
a) Determine the expected NPV in today’s dollar if he harvests in 1 year?
b) Determine the expected NPV in today’s dollar if he harvests in 2 years?
c) When must he harvest the plant? Describe why?