99
Table 20. Area Needed to Earn 15,000 Pesos in One Semester and the
Probability of Successa
E [n] per Hectare at
Crop Area Probability Given Probability Level
Hectares Pesos
Cotton 31 .71 487
Rice 18 .78 1,071
Sesame 20 .79 764
Sorghum 20 .83 765
a See appendix for probabilities.
With the required area producing the relatively low risk crop to guarantee, as much as possible, the minimum necessary income, the remainder of the farm could be used for the crops which maximize profit or rate of return.
Minimizing Expected Losseslo
There was a wide range in the expected value of the losses among the crops in the study, with the highest losses in the high cost crops. In Table 21 the values of the loss components and the magnitude of the total cost of the loss (T ) are given.
The value for R (i.e., .10) which was chosen was based on the
approximate rate of return on short term government development bonds. It was believed that this alternative could be considered risk-free, and the short term (6 months) of investment minimizes the loss due to
10 Symbols are defined in Chapter 11, Pg. 31-33.