An extension agency implements a 4‑year programme to raise maize yields. The programme costs ₦1,200,000 in year 1, ₦800,000 in year 2, ₦500,000 in year 3 and ₦300,000 in year 4. Expected yield increases are 1,500 t in year 2, 2,000 t in year 3 and 2,500 t in year 4. The market price of maize is ₦120 per kg and the discount rate is 10 % per annum. Calculate the Net Present Value (NPV) of the programme in Naira (rounded to the nearest thousand) and state whether the programme is economically justified (NPV  0).

Question

An extension agency implements a 4‑year programme to raise maize yields. The programme costs ₦1,200,000 in year 1, ₦800,000 in year 2, ₦500,000 in year 3 and ₦300,000 in year 4. Expected yield increases are 1,500 t in year 2, 2,000 t in year 3 and 2,500 t in year 4. The market price of maize is ₦120 per kg and the discount rate is 10 % per annum. Calculate the Net Present Value (NPV) of the programme in Naira (rounded to the nearest thousand) and state whether the programme is economically justified (NPV > 0).

Accepted Answer

₦531,731,000 (positive, therefore justified)

Waec Model Questions Vol1 2023 Agricultural Science Question 50

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