Buyers would pay exactly $175 per acre for the teak today. In one year, however, that wood will be perfectly matured. Buyers will be willing to pay $220 per acre. The trees will be past their peak after that and will start to lose their value. From now until one year from now, the oakwill have the exact same value per acre as the teak. The difference is that the oak will continue to increase in value by $10 per acre per year for the next 30 years. To be clear, an acre of oak is worth $175 today, $220 in a year, $230 in two years, and so on. The maple is currently cheaper. It runs $100 and acre right now. One year from now, it will be worth $250 per acre, and that amount will rise by $50 per acre per year for the next 20 years.

Required:
a. What is the most Maria would be willing to pay per case for an acre of teak?
b. What is the most Maria would be willing to pay per acre of oak?
c. How old will the maple be when it first becomes worthwhile for investors to sell off their holdings?

Suppose that a major city’s main thoroughfare, which is also an interstate highway, will be completely closed to traffic for two years, from january 2014 to december 2015, for reconstruction at a cost of $535 million. if the construction company were to keep the highway open for traffic during construction, the highway reconstruction project would take much longer and be more expensive. suppose that construction would take four years if the highway were kept open, at a total cost of $800 million. the state department of transportation had to make its decision in 2014, one year before the start of construction (so that the first payment was one year away). so the department of transportation had the following choices: (i) close the highway during construction, at an annual cost of $267.5 million per year for two years. (ii) keep the highway open during construction, at an annual cost of $200 million per year for four years. now suppose the interest rate is 80%. calculate the present value of the costs incurred under each plan.