





1 comment:

jhylands wrote at December 09, 2020 10:22 AM

I'm sure you've found a solution to this already given this is almost 2 decades ago, but one way to work with future values is to use discounting.
The technique is used in finance to work out the value of things going into the future.
In the example from the post the way you would compare two farms yielding a unit after 6 months and one yielding a unit after 3 months would be as follows.
Take a time based discounting factor, in this case well use 3% per month.
What that means is that £100 today is worth the same to the agent as £103 in a months time. (3% would be more realisticly used over the course of a year but the point remains)

We can then calculate the value of the two scenarios as follows assuming a constant price for one unit of yield:
For a single farm the yield is 1/(1.03^3) + 1/(1.03^6) = 1.75
for the two farms the yield is 2/(1.03^6) = 1.67

In that way you can clearly represent the benefit of the more frequently yielding farm.