Question

Suppose a farmer in georgia begins to grow peaches. he uses​ $1,000,000 in savings to purchase​ land, he rents equipment for ​$80 comma 00080,000 a​ year, and he pays workers ​$150 comma 000150,000 in wages. in​ return, he produces 300 comma 000300,000 baskets of peaches per​ year, which sell for ​$3.003.00 each. suppose the interest rate on savings is 22 percent and that the farmer could otherwise have earned ​$40 comma 00040,000 as a shoe salesman.

Answer 1

The farmer is better off being a farmer. After 1 year the farmer will have made 900,000 off of 300,000 baskets. Minus the lease of land and payment of workers, the farmer will have over 650,000. Leave that in the bank and do it another year, interest at 22% would net around 147,000. Add that to 650kx2. That equals a little over 1.4 million. So in closing, farmer is more lucrative than shoe salesman.