Problem 1: Loblolly Pine Plantation (Known Rotation Range) A forester is considering planting loblolly pine on a recently acquired site. They expect the optimal rotation to be between 20 and 40 years. The following information is available: • • • • Land cost: $500/acre (one-time cost at year 0) Establishment cost: $250/acre at year 0 Annual property taxes: $3/acre/year Timber price: $100/acre/year (assumed constant throughout the rotation) Discount rate: 7% Calculate the LEV for each year between 20 and 40 years and identify the optimal rotation age that maximizes LEV.

Required information PEMEX, Mexico's petroleum corporation, has an estimated budget for oil and gas exploration that includes equipment for three offshore platforms as shown. Use PW analysis to select the best alternative at a MARR of 16% per year. Platform First cost, $ million Y Z -300 -450 -510 M&O, $ million per year -320 -290 -230 Salvage value, $ million 75 50 90 Estimated life, years 20 20 20 Select platform X, Y, or Z using tabulated factors. The present worth of platform X is $- 2298.4 worth of platform Z is $- 1944.14 million, the present worth of platform Y is $- 2262.15 million, and the present million. The platform selected based on the present worth is platform Z

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12.9 A three-year maintenance contract for a local computer network costs $4000. The network is expected to be needed for fifteen years and the maintenance contract will be purchased for the same price at the beginning of every three year period. If the interest rate is 6%, the present equivalent cost of the maintenance contract is nearest: (A) $12,950 (B) $14,500 (C) $15,400 (D) $16,000