Given the following net future values for harvesting trees (one time harvest): If the cost of capital is 15%, calculate the optimal year to harvest:
$$\begin{array} { l c c c c c c }
\text { Year } & 0 & 1 & 2 & 3 & 4 & 5 \
\text { Net Future Value } & 100 & 125 & 150 & 175 & 195 & 210
\end{array}$$
A) Year 1
B) Year 2
C) Year 3
D) Year 4

Question

Given the following net future values for harvesting trees (one time harvest): If the cost of capital is 15%, calculate the optimal year to harvest:
$$\begin{array} { l c c c c c c } 
\text { Year } & 0 & 1 & 2 & 3 & 4 & 5 \
\text { Net Future Value } & 100 & 125 & 150 & 175 & 195 & 210
\end{array}$$
A) Year 1
B) Year 2
C) Year 3
D) Year 4

Quizplus · Accepted Answer

The optimal year to harvest is the year with the highest present value. Calculating the present value for each year using a 15% discount rate, Year 3 has the highest present value.