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Tiger-Farms has a net income from farm income of $94,000, farm interest expense of $18,000, and owner withdrawals for unpaid labor and management of $40,000.

Tiger-Farms has a net income from farm income of $94,000, farm interest expense of $18,000, and owner withdrawals for unpaid labor and management of $40,000. Average total farm assets of $828,500. Show all work.

a. Calculate the Rate of Return on Farm Assets (ROFA) Tiger-Farms. Interpret.

b. Explain why farm interest expense is added back into the formula for ROFA. Why are owner withdrawals for unpaid labor and management is subtracted out?

c. If the Rate of Return on Farm Equity (ROFE) is 0.054, is Tiger-Farms leveraged effectively?

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