Theses and Dissertations at Montana State University (MSU)
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Item The effects of taxes and inflation on the composition of inputs to agriculture(Montana State University - Bozeman, College of Agriculture, 1981) Hart, Douglas RogerItem Effects of taxes and age on depreciation : the case of combine harvesters(Montana State University - Bozeman, College of Agriculture, 1990) Goroski, John Michael; Chairperson, Graduate Committee: Joseph Atwood.Economic depreciation of the total capital stock of a physical asset is determined by the flow of services used in productive activities and by the size of the capital stock. Previous research studies have attempted to analyze economic depreciation by modeling the flow of services. These studies have often failed to fully specify the model by not including important asset specific explanatory variables, and their models were often estimated with restricted functional forms, which implicitly limited the pattern of economic depreciation. This study, on the other hand, uses a flexible functional form which models price as an exponential quadratic function of age, and thus allows the pattern of economic depreciation to be dervied within the model. The behavior of used asset prices are also estimated as an explicit dynamic process which permits a stronger statistical test of the results. In examining the economic depreciation of combine harvesters, this study utilizes specific explanatory variables to account for the effects of changes in the tax code, shocks in demand, and quality and technology differences across combine harvester models. The major empirical results of this study state that depreciation rates are not constant across different ages of combine harvesters and that depreciation rates and patterns are not stable with respect to changes in tax codes. These results present evidence that if further examination of either economic depreciation or optimal replacement problems are to be solved in an internally consistent manner, a more flexible functional form of the used asset price equation must be utilized such as the flexible funtional form used in this study, and changes in the tax code must be included as a specific explanatory variable.Item Optimal replacement interval and depreciation method of a combine on a representative dryland grain farm in northcentral Montana(Montana State University - Bozeman, College of Agriculture, 1984) Weersink, Alfons John, 1959-; Chairperson, Graduate Committee: Daniel Dunn; M. Steve Stauber (co-chair)Economic uncertainty is one of the foremost problems in agriculture and introduces many complexities into the decision making process. To account for these risks and uncertainties in the replacement problem, a model is formulated within a dynamic programming framework and applied to a typical cash grain farm in northcentral Montana. The decision criterion used under conditions of risk is the minimization of costs associated with each asset through the firm's planning horizon. The asset under study is a combine and the optimal replacement decision regarding this asset is based on the stochastic nature of winter wheat prices. Transition probabilities for price changes are calculated from a single equation price prediction model. The other state variables are deterministic and include fifteen asset ages and sixteen tax conditions. Together, they completely summarize the costs associated with the combine. The optimal decision minimizes the expected immediate costs and those from the n-1 stage process which are a function of the state variables and decision alternative selected. Besides being able to keep or replace, the decision variable for replacement also includes all the possible depreciation schedules and investment incentives which can be used on the new asset. The optimal policy selected is dependent upon the state of the process. The accelerated cost recovery system is used in high income years after five years of service and a longer recovery period when returns are very low. The evidence also indicates the value of investment tax credit. The practical and wide ranging results obtained through the use of stochastic dynamic programming contributes to the body of theoretical knowledge on replacement analysis.