Ag Business Management
Problem Solving #8
Name
1. On April 1, 2015, Janice borrowed $10,000 to plant corn. On November 1, 2015, she repaid the $10,000 along with $418.25 interest. What annual interest rate did she pay?
A. 7.17%
B. 10.75%
C. 12.25%
D. 14.34%
E. None of the above
2. Average corn yields have historically increased at an annual rate of 2%. If the current average is 160 bushels per acre, what do we expect the average yield will be in 5 years if it continues to grow at this rate?
A. 165.0 bushels
B. 165.6 bushels
C. 167.3 bushels
D. 176.7 bushels
E. None of the above
3. The carcass weight of a hog usually averages 76% of the live weight at the time of slaughter. If it costs 65 cents per pound to raise a hog to slaughter, what is the breakeven carcass price?
A. $61.80/cwt.
B. $68.20/cwt.
C. $72.37/cwt.
D. $85.53/cwt.
E. None of the above
4. Costs that do NOT vary with short-run changes in production for a business firm are
these costs:
a. fixed
b. opportunity
c. marginal
d. controllable
5. You are considering the purchase of a used combine, rather than continuing to hire a custom operator at $25.00 per acre. If you purchase the machine, the annual fixed costs (interest, depreciation, etc.) will be $24,000. The variable cost is $15 per acre including the extra labor. There would be no other changes in costs and returns associated with ownership and no savings other than the custom charges. How many acres must be harvested each year in order to justify (on a breakeven basis) purchasing the combine?
A. 1960
B. 2400
C. 2650
D. 3,600
E. None of the above
6. A farmer who wants a real rate of return on his investment of 6% will use what discount rate if he anticipates inflation of 3% per year?
A. 18%
B. 3%
C. 8%
D. 9%
E. None of the above
7. Money owed by you that you have NOT paid yet would be called this on your ‘balance
sheet’:
a. account payable
b. negative cash flow
c. current liability
d. account receivable
8. A risk taker in business is:
a. a hedger
b. making a poor decision
c. an entrepreneur
d. a profit maker
9. When an individual evaluates alternatives for how their property will be distributed at the
time of their death, they are engaged in:
a. budgeting
b. feasibility analysis
c. worst-case scenario evaluations
d. estate planning
10. Net worth, on a balance sheet =
a. total assets
b. total claims on assets
c. total liabilities
d. claims on assets by owners of the business
11. Which of the following is a main reason to refinance a loan?
a. to reduce the principal
b. to increase tax deductions
c. to take advantage of a lower interest rate
d. all of the above
12. What is the ‘future value in one year’ of $108 today if the interest rate = 8%?
a. $108.00
b. $116.64
c. $224.64
d. $100.00
13. Assume a farmer insured 300 acres of crop production at a premium of $10.00 per acre and received an indemnity payment of $24,000 at the end of the year. In this case, the farmer would have ‘netted’ how much on his insurance purchase?
a. +$27,000
b. -$21,000
c. -$6,000
d. +$21,000