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Unformatted text preview: Think Break # 22 Suppose you calculate the NPV of planting an apple orchard over 15 years is $3,500 using a 5% discount rate. What is the value of the annuity factor K? K = (1/r){1 [1/(1 + r)t]} What is the annuity payment that will generate the same NPV as the apple orchard over 15 years? Think Break # 22 Answer NPV = $3,500, r = 0.05, t = 15 What is the value of the annuity factor K? K = (1/r){1 [1/(1 + r)t]} K = (1/0.05){1 [1/(1.05)15]} = 10.3797 What is the annuity payment that will generate the same NPV as the apple orchard over 15 years? C = NPV/K = 3500/10.3797 = $333.56 ...
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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.
 Spring '08
 MITCHELL

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