A farmer is trying to decide what size planter to purchase. She is planting 2000 acres of

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Question:

A farmer is trying to decide what size planter to purchase. She is planting 2000 acres of soybeans in Illinois, double-cropped after wheat harvest. For your calculations of costs, you will compare the cost of a 36-row planter and a 48-row planter.

List prices are $403,901 for the 36-row planter and $543,439 for the 48-row planter.

a. (10 pts) The purchase price is 90% of list price and salvage value is 25% of the purchase price. Assume a 10-year life and an interest rate of 6%. Use the capital consumption equation to calculate the total annual depreciation and interest for each option.

b. (2 pts) Calculate annual taxes, shelter, and insurance for each option.

c. (2 pts) Calculate total annual fixed costs for each option.

d. (6 pts) The soybeans are planted on 20-in rows. Using the typical speed and field efficiency in the standard, what is the effective field capacity of each option?

e. (4 pts) Operator labor is $18/hr. What is the annual labor cost of each option?

f. (2 pts) Planting operations require approximately 0.5 gal/acre of fuel, regardless of planter size. Diesel fuel costs $4/gal. What is the annual fuel cost for planting?

g. (4 pts) Tractor costs are $120/hr. What is the tractor cost with each option?

h. (8 pts) Calculate repair and maintenance costs of each planter according to the ASABE standard in year 1, given the purchase price and number of hours of operation required for each planter.

i. (2 pts) Considering labor, tractor, fuel, and repair and maintenance costs, what are the total annual variable costs for each option?

j. (10 pts) Calculate timeliness costs for each option. The optimal planting date for double-cropped soybeans in Illinois is July 1, planting begins on the optimal date. Use the pwd at a 50% confidence level. Planting will be done for 14 hr. Optimal soybean yield is 65 bu/ac and the soybean value is $15/bu.

k. (2 pts) Considering fixed, variable, and timeliness costs, which is the better option?

l. (10 pts) What is the optimal width for the planter? The FC% based on the above numbers is 13.69% and the pw is $6100/ft. Other values are from the standard or given in the problem above.

m. (2 pts) Are either of the options above an appropriate choice for the planter? Briefly explain.