In this 12-minute screen cast, Steve Hadcock discusses how partial budgeting could be used to help decide whether to purchase a new tractor or not.
The Situation:
A farm currently has a 40 hp gas tractor that is key tractor for tillage, bed preparation and planting. It is getting costlier to use the tractor each year. It is tired. The farmer has purchased some new equipment that is slightly over-sized for the tractor. The farmer is considering purchasing used, 60 HP, four wheel drive tractor with a bucket, and trading in the 40 hp and financing the remaining amount needed to purchase the “new” tractor. Click on the play button below or view on YouTube
Resources:
Here are some resources Steve found useful in developing this case study example. You may find them useful as well
- Estimating the Field Capacity of Machinery – Iowa State University
- Estimating Farm Machinery Costs – Iowa State University
- There are several online resources to estimate the current market value of farm machinery. Here are some to choose from:
Next Up: Is changing a particular production practice financially feasible? Using Partial Budgeting to evaluate changes in irrigation systems.