A farmer just purchased a tractor for which he had to borrow $20,000. The bank, using an 8% interest rate, offered a choice of three payment plans as shown below. The farmer’s Minimum Attractive Rate of Return (MARR) is 15%.
Plan A: $510 per year for 5 years
Plan B: $2,956 per year for 4 years, plus $15,000 at the end of 5 Years
Plan C: Nothing for 2 years, then $9048 per year for 3 years
a) In EXCEL create a Cash Flow Table showing all time increments and all cash flows.
b) Which Plan provides the best use of the farmer’s capital?