Suppose a farmer in georgia begins to grow peaches. he uses $1,000,000 in savings to purchase land, he rents equipment for $ 100 comma 000 100,000 a year, and he pays workers $ 100 comma 000 100,000 in wages. in return, he produces 150 comma 000 150,000 baskets of peaches per year, which sell for $ 4.00 4.00 each. suppose the interest rate on savings is 4 4 percent and that the farmer could otherwise have earned $ 45 comma 000 45,000 as a shoe salesman.

Lipman auto parts, a family-owned auto parts store, began january with $10,300.00 in cash. management forecasts that collections from credit customers will be $11,400.00 in january and $14,800.00 in february. the store is scheduled to receive $5,000.00 in cash on a business note receivable in january. projected cash payments include inventory purchases ($13,000.00 in january and $13,600.00 in february) and operating expenses ($2,700.00 each month). lipman auto parts' bank requires a $10,000.00 minimum balance in the store's checking account. at the end of any month when the account balance dips below $10,000.00, the bank automatically extends credit to the store in multiples of $1,000.00. lipman auto parts borrows as little as possible and pays back loans in quarterly installments of $2,000.00, plus 4 percent interest on the entire unpaid principal. the first payment occurs three months after the loan.