Neco Model Questions Vol1 2018 Agricultural Science Question 3

Practice objective / multiple choice question 3 from the 2018 Neco Model Questions Vol1 Agricultural Science examination.

Neco Model Questions Vol1 2018 Agricultural Science Objective / Multiple Choice Hard Difficulty
Question 3 NECO_MODEL_QUESTIONS_VOL1 • 2018 • AGRICULTURAL_SCIENCE • objective

A farmer needs a tractor for five years. Option A: purchase for N500,000, straight‑line depreciation over 5 years with a salvage value of N50,000, and an annual operating cost of N80,000. Option B: rent at N120,000 per year. Using a discount rate of 12 % per annum, which option has the lower present value of total cost over the 5‑year period? Show the present values for both options (rounded to the nearest thousand N).

Answer Options

Correct Answer A. Renting (PV ≈ N433,000) is cheaper than purchasing (PV ≈ N760,000).
B. Renting (PV ≈ N433,000) is cheaper than purchasing (PV ≈ N700,000).
C. Renting (PV ≈ N500,000) is cheaper than purchasing (PV ≈ N750,000).
D. Purchasing (PV ≈ N433,000) is cheaper than renting (PV ≈ N760,000).
Correct Answer
A
Correct Option:
Renting (PV ≈ N433,000) is cheaper than purchasing (PV ≈ N760,000).

About This Question

This is Neco Model Questions Vol1 2018 Agricultural Science Question 3. It is one of the objective questions from the 2018 Neco Model Questions Vol1 Agricultural Science examination.

Difficulty level: Hard .

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