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1. Explain how a cash basis farmer can raise or lower taxable income by purchase and selling decisions made in December. Can an accrual basis farmer do the same thing? Why? 2. Assume Fred Farmer purchases a new planter for $632,500 on March 1, 2021. Compute the maximum Section 179 expensing and regular depreciation for the year of purchase using the regular MACRS method and calculate the planter's adjusted tax basis at the end of the year. Assume the 2021 expensing taken is 500,000 Part II 1. Explain the difference between compounding and discounting. 2. Assume you have only $23,000 to invest and must choose between the two investments below. Analyze each using the below three methods and a 9 percent opportunity cost for capital (discount rate). Which investment would you select? Why? Investment A Investment B ($) Initial cost 23,000 23,000 Net cash revenues: Year 1 6,000 5,000 Year 2 6,000 5,000 Year 3 6,000 5,000 Year 4 6,000 5,000 Year 5 6,000 5,000 Terminal value (year 5) 0 7,000 Payback method: Net present value: Internal rate of return: 3. Why would capital budgeting be useful in analyzing an investment of establishing an orchard where the trees would not become productive until 6 years after planting? 4. Discuss economic profitability and financial feasibility. How are they different? Why should both be considered when analyzing a potential investment? Part III 1. Has fertilizer prices increased over the last year? Use the Prices Paid Index (PPI) to demonstrate (give a value) if they have gone up or down in the past year. Also, is fertilizer more expensive than 2011, how do you know? 2. From the same index, what index 2021 group has decreased in cost since 2011 (list the group and how your know it has decreased)