A Farm Must Decide Whether or Not to Purchase a New

Multiple Choice

A farm must decide whether or not to purchase a new tractor.The tractor will reduce costs by $2,000 in the first year,$2,500 in the second,and $3,000 in the third and final year of usefulness.The tractor costs $9,000 today,while the above cost savings will be realized at the end of each year.If the interest rate is 7 percent,what is the net present value of purchasing the tractor?

A) $6,764
B) $9,362
C) $18,362
D) None of the statements associated with this question are correct.