Richards\' Tree Farm, Inc., is doing well after its incorporation. Jake Richards

Question

Richards' Tree Farm, Inc., is doing well after its incorporation. Jake Richards, president, chief of operations, and majority shareholder, currently has a planting of 10,000 three-year-old Japanese dogwood trees in a recently introduced pink-flowered variety. This type of tree can be sold at a higher price than the more common white-flowered variety. The trees are now 6 feet tall on average and can be sold for $24 each. At present, 8-foot trees are priced at $34 and 10-foot trees at $40. Landscape contractors avoid trees larger than 10 feet tall because they are difficult to transplant successfully. With average weather, the 6-foot trees will be 8 feet tall in another three years and 10 feet tall in six more years.

Jake has to make financial decisions almost everyday. Today

Explanation / Answer

Price of 6 feet tree today = $ 24

Price of 8 feet tree 3 years later = $ 34*(1.03)^3 = $ 37.15

Price of 10 feet tree 6 years later = $ 40*(1.03)^6 = $ 47.76

Here we are trying to compare the prices recieved for each size of tree after they grow to 8 feet and 10 feet respectively

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