Question: You are thinking about buying a farm in Wright County Iowa. Average prices are about $8,500 per acre and annual rents are expected to be

You are thinking about buying a farm in Wright County Iowa. Average prices are about $8,500 per acre and annual rents are expected to be $240 per acre next year and grow at 2% forever. Your required return is 5%. If you expect constant rent forever, what is the profitability index for an acre of land? (Hint: Find the NPV of purchasing an acre first.) a. -0.435 b. -0.0588 c. -$500.00 d. 4.8235%

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