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

Question

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

Quizplus · Accepted Answer

The optimal year to harvest is year 3 because the net future value is highest in that year.