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Optimal Replacement Interval And Depreciation Method For A Grain Combine

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Author Info

  • Weersink, Alfons
  • Stauber, Steve

Abstract

A stochastic dynamic programming model is developed to determine optimal replacement intervals and depreciation schedules for a combine on a cash grain farm in north central Montana, where the optimal decision is based on the stochastic nature of winter wheat prices. Empirical results indicate that the decision varies widely depending on the states describing the conditions facing the farm firm. Under normal profitable conditions and ERTA81 tax legislation, suggested replacement is after five years of service, the new asset being depreciated under the accelerated cost recovery system and the investment credit option. Changes to the tax law would tend to smooth out and increase this replacement interval.

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File URL: http://purl.umn.edu/32156
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Bibliographic Info

Article provided by Western Agricultural Economics Association in its journal Western Journal of Agricultural Economics.

Volume (Year): 13 (1988)
Issue (Month): 01 (July)
Pages:

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Handle: RePEc:ags:wjagec:32156

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Web page: http://waeaonline.org/
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Related research

Keywords: Agricultural Finance; Farm Management;

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Cited by:
  1. Tozer, Peter R., 2005. "Depreciation Rates for Australian Tractors and Headers - Is Machinery Depreciation a Fixed or Variable Cost?," 2005 Conference (49th), February 9-11, 2005, Coff's Harbour, Australia 137951, Australian Agricultural and Resource Economics Society.
  2. Van Tassell, Larry W. & Nixon, Clair J., 1989. "A Further Look At The Effect Of Federal Tax Laws On Optimal Machinery Replacement," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 21(02), December.

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