You own a tract of trees and are deciding whether to harvest them now or next ye

Question

You own a tract of trees and are deciding whether to harvest them now or next year. If you harvest them now, you can invest the proceeds and get a return of 5% on your investment. What should you do?

Let the trees grow as long as their dollar worth increases by less than 5%

Cut down the trees, and sell them

Let the trees grow

Let the trees grow as long as their dollar worth increases by more than 5%

Let the trees grow as long as their dollar worth increases by less than 5%

Cut down the trees, and sell them

Let the trees grow

Let the trees grow as long as their dollar worth increases by more than 5%

Explanation / Answer

d.

Let the trees grow as long as their dollar worth increases by more than 5%

because it means that you will get more by growing as higher dollar worth increases more than 5 percent means it offset your opporunity cost as well as provide additional return.

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