Think Break 20

Think Break 20 - Think Break #20 At a farm sale, you see a...

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Unformatted text preview: Think Break #20 At a farm sale, you see a 57 year old John Deere tractor for sale for $6,000. You're an antique tractor aficionado know that in 3 years, when it's 60 years old, it will be worth $7,500. Assuming a 7% discount rate, should you buy it, if you want to make money? Think Break #20 Answer At a farm sale, you see a 57 year old tractor for sale for $6,000. You're an antique tractor aficionado and know that in 3 years, when it's 60 years old, it will be worth $7,500. Assuming a 6% discount rate, should you buy it, if you want to make money? PV = FV/(1 + r)t = 7,500/1.063 = $6,297.14: Buy it! FV in PV terms > price ...
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This note was uploaded on 08/08/2008 for the course AAE 320 taught by Professor Mitchell during the Spring '08 term at Wisconsin.

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