32. You have 200 pigs to market at 250 lbs. a piece. Overhead (fixed) costs total $15,000. Feed costs are $10 per pig and other costs are $2 per pig. What price per pound is needed to breakeven?

a. $0.435

b. $0.30

c. $0.248

d. $0.348

e. None of the above.

33. Most farmers are more likely to accept a risk if:

a. Only a small possible loss is involved

b. The have a high debt to asset ratio

c. They have high fixed cost cash flow obligations

d. They are primarily concerned with maintaining their net worth

34. Depreciation expense for a new tractor is $15,000 per year. You use the tractor 500 hours in the first year: 350 are used in your corn enterprise, 100 for soybeans, and 50 hours for hay. How much of the depreciation expense should be allocated to the corn enterprise if hours of use determine the allocation?

a. $15,000 b. $10,500 c. $4,500 d. $3,000 e. $0

35. Joe's farm has $50,000 current assets, $150,000 long term assets, $30,000 current liabilities, and $50,000 long term liabilities. Joe's debt to equity ratio is:

a. 0.33 b. 0.5 c. 0.67 d. 0.75 e. 1.50

36. Joe's farm has $50,000 current assets, $150,000 long term assets, $30,000 current liabilities, and $50,000 long term liabilities. Joe's net worth is:

a. $120,000 b. $20,000 c. $240,000 d. -$120,000

37. A cash flow shows all the following except:

a. When you need to borrow money.

b. How much money you need to borrow.

c. When you can increase spending without additional borrowing. d. When you can repay loans.

e. All of the above are shown by using cash flow.

38. Which of the following is not true about partial budgets?

a. They help analyze how changes in certain farm enterprises affect profits.

b. They measure every return and cost change, whether increased, decreased, or stay the same.

c. They show the effect that various prices, yields, and costs have on net farm income if proposed change is made.

d. They help analyze loan repayment capacity of a farm business.

e. They are usually simpler than complete farm budgets.

(Questions 39-41) Use the following Present and Future Values table to answer questions 39 to 41.

Year 1

2

3

Present Value of $1 $0.926

$0.857 $0.794

Future Value of $1 $1.080

$1.166 $1.260

39. If you receive $2,000 one year from now and $10,000 3 years from now, what is it worth today?

a. $14,760 b. $12,000 c. $11,112 d. $9,792 e. $9,528

40. If you have $25,000 today, what will it be worth 2 years from now? a. $31,500

b. $29,150 c. $27,000 d. $25,000 e. $21,425

41. You received $15,000 today, and will receive a payment of $5,000 once a year for the next 3 years. What is the present value of this income?

a. $15,000 b. $20,000 c. $26,910 d. $27,885 e. $30,000

42. The major subdivisions of a balance sheet are:

a. Assets, liabilities and net worth.

b. Income, expenses, and net profit.

c. Cash received, cash paid, and cash remaining.

d. Amount borrowed, amount paid off, and balance outstanding.

9

43. If a decision-maker is using the Weighted Average Cost of Capital to calculate an appropriate discount rate and will use 60% debt and 40% equity with an interest rate on borrowed capital of 6% and the long-run return on equity of 10% and the farm is in the 28% marginal tax bracket, what is the WACC?

a. 7.8% b. 8.7% c. 6.6% d. 8.4%

44. If the interest rate is 10%, what is the present value of a dollar to be received by a producer two years from now?

a. $0.826

b. $0.857

c. $0.920

d. $1.166

e. None of the above

45. A diminishing marginal product occurs because of: a. decreasing output prices

b. increasing input prices

c. decreasing input prices

d. limits on physical or biological response to increased input levels

46. When a borrower wants to establish credit with a new lender, the possibility of success will be improved if:

a. existing loans and accounts payable are not revealed

b. several years of accurate financial statements are provided, which show

progress over time

c. the borrower will guarantee the loan alone rather than with a co-signer

d. the loan request is for a land purchase rather than for self-liquidating assets

such as feeder stock

47. The "rule of 72" says to divide 72 by the annual interest rate to estimate the number of years needed for an initial investment earning that rate to double. How long would it take for $5 earning 6% a year to grow to $20?

a. 12 years b. 24 years c. 36 years d. 48 years

48. Ways to handle risk include all of the following except: a. Shift risk

b. Reduce risk c. Self-insure d. Avoid risk e. Clean risk