IV$.$ Partial budgeting: Irrigation

Ike Irrigator needs your help. He's considering switching from dryland corn to irrigated corn. Ike currently farms $1000$ acres of dryland corn and would convert the whole $1000$ acres.

Information: Dryland Irrigated

Yield $120$ bu$.$ acre. $170$ bu$.$ acre

Price $$4\mathrm{.}20/$bu$.$ $$4\mathrm{.}20/$bu$.$

Variable Costs

Fertilizer $$100/$acre $$140/$acre

Fuel &Chemicals $$80/$acre $$140/$acre

Labor $$12/$acre $$20/$acre

All other variable inputs remain unchanged, except, of course, interest on operating capital. Calculate variable interest at $5\%$ for $6$ months.

Information on Irrigation equipment: Original cost $$800,000$; Salvage value $50,000.$ Useful life $10$ years. Calculate straight line depreciation. Calculate fixed interest charge at $5\%$ on the average value of the equipment. There are no taxes or insurance on the equipment. $1.$ What would the expected irrigated corn yield have to be to make the two choices just equal in potential profit $($breakeven yield$)?$

$2.$ Should Ike switch to an irrigated system? If Ike purchases this irrigation system, what are other considerations besides changes in net profit that should be accounted for?