2008 MISSOURI FFA FARM MANAGEMENT CONTEST
Multiple Choice Section
The Farm Management Contest is designed to test student
understanding of the application of economic principles in farm
management. Each question is worth three (3) points.
Choose the best answer and mark the appropriate box on the score
sheet provided. There is only one correct answer to each
question.
1. For the rules of depreciation, which of the following is an
example of "listed property"?
A. A home
B. A raised cow
C. A greenhouse
D. A passenger car
E. None of the above
2. A farmer purchases 550-pound feeder steers for $1.20 per
pound and plans to sell the steers at 750 pounds. The
farmer estimates the total cost of gain to be 65 cents per
pound. The nearest breakeven price when the steers are sold
at 750 pounds is
A. $79.14/cwt.
B. $81.25/cwt.
C. $92.50/cwt.
D. $105.33/cwt.
E. None of the above
3. If grain sorghum has 97% of the feeding value of corn on a
pound-for-pound basis and corn is selling for $5.25 per
bushel, then a hundredweight of grain sorghum is worth
A. $5.09
B. $7.73
C. $9.09
D. $9.37
E. None of the above
4. Corn has an expected yield of 155 bushels per acre and
production cost of $300.00 per acre. Expected market prices
are $5.00 per bushel for corn and $12.00 per bushel for
soybeans. Soybeans can be raised at a production cost of
$150 per acre. At what breakeven yield per acre would
soybeans generate the same net return per acre as corn?
A. 34.3 bushels
B. 36.4 bushels
C. 45.3 bushels
D. 52.1 bushels
E. None of the above
5. If high oil corn has the same production cost per acre as
regular corn but can be sold for 20 cents per bushel more,
what yield of high oil corn is needed to equal 150 bushels
of regular corn at $5.00 per bushel?
A. 141.6 bushels
B. 144.2 bushels
C. 148.7 bushels
D. 156.0 bushels
E. None of the above
6. A soybean producer decides to store his soybeans in the
local elevator for four months. The price at harvest is $5
per bushel and the elevator charges 2 cents per bushel per
month for storage plus a 5 cents per bushel handling charge.
He has 5,000 bushels to sell and must borrow $25,000 at 9%
annual interest while he stores the soybeans. What price
must he receive for his soybeans to break even and cover his
storage and opportunity costs?
A. $5.07
B. $5.13
C. $5.23
D. $5.28
E. None of the above
7. How many pounds of 48% protein soybean meal must be mixed
with 10% protein wheat to make a ton of 16% protein feed?
A. 316 pounds
B. 400 pounds
C. 439 pounds
D. 487 pounds
E. None of the above
8. Which of the following is not a type bankruptcy?
A. Chapter 7
B. Chapter 11
C. Chapter 12
D. Chapter 13
E. None of the above
9. How many total acres are included in the "S 1/2 of the NW
1/4 and NE 1/4 of the SW 1/4 of Section 15, Twp. 10N, R4W of
the 5th Principle Meridian"?
A. 80 acres
B. 120 acres
C. 160 acres
D. 240 acres
E. None of the above
10. How much perimeter fence would be required to completely
enclose the parcel of land described in the question above?
A. 1.5 miles
B. 2.0 miles
C. 2.5 miles
D. 3.0 mile
E. None of the above
11. A farmer who wants a real rate of return on his investment
of 5% will use what discount rate if he anticipates
inflation of 2% per year?
A. 2%
B. 3%
C. 5%
D. 7%
E. None of the above
12. An increase in the rate of inflation, everything else equal,
will have what impact on the present value of a future
stream of income?
A. No impact
B. Increase the present value
C. Decrease the present value
D. Cannot tell
E. None of the above
13. Fred Brown raises corn and feeds it to his hogs. This type
of business structure is an example of
A. vertical integration.
B. horizontal integration.
C. supply company.
D. marketing cooperative.
E. None of the above
14. If the price of a commodity is too low, the demand will be
greater than the supply resulting in a
A. surplus.
B. boycott.
C. monopoly.
D. shortage.
15. For tax year 2007, a self-employed individual may deduct
_____% of his/her cost for health insurance.
A. 40%
B. 45%
C. 50%
D. 100%
E. None of the above
16. When the size of the soybean harvest exceeds locally
available farm and elevator storage, what happens to the
basis?
A. Basis narrows.
B. Basis widens.
C. Basis goes out of existence.
D. Basis is usually the same all year long.
17. The money you must deposit with a broker to insure
performance in order to trade in the futures market is
called
A. basis.
B. margin.
C. commission.
D. spread.
E. None of the above
18. The short-run supply curve for a firm is identical to
A. average variable cost.
B. average fixed cost.
C. average total cost.
D. marginal cost.
E. None of the above
19. As a farmer plants more acres of a crop, which of the
following costs is least likely to change?
A. Total variable costs
B. Average variable costs per acre
C. Average fixed costs per acre
D. Average total costs per acre
E. Both C and D
20. Average total cost is equal to
A. total variable cost divided by output.
B. total fixed cost divided by output.
C. (total variable costs + total fixed cost) divided
by output.
D. total cost x output.
E. None of the above
21. A farm business with declining average total costs has
A. increasing returns to size.
B. decreasing returns to size.
C. constant returns to size.
D. decreasing demand.
E. None of the above
22. The maximum amount that a wife can inherit from her husband
without owing any federal estate tax is
A. $10,000.
B. $600,000.
C. $600,000 less excess gift tax.
D. unlimited.
E. None of the above
23. Many farmers do a considerable amount of custom work. Their
reason for doing this is
A. to spread the fixed cost of their equipment over
more acres.
B. to earn a return to under-utilized labor.
C. to help out their neighbors.
D. to supplement on-farm income.
E. All of the above
24. Using comparable sales for the purpose of appraising
farmland is called the
A. inventory approach to appraising.
B. earnings approach to appraising.
C. market approach to appraising.
D. cost approach to appraising.
E. None of the above.
25. Other things equal, the value of land will be greatest to
the farmer who has the
A. longest planning horizon.
B. shortest planning horizon.
C. highest discount rate.
D. lowest discount rate.
E. None of the above
26. A farmer has $150,000 of principal remaining on a mortgage
at the end of this fiscal year. The annual principal
payment is $15,000. Accrued interest at the end of the year
amounts to $8,500. The year-end balance sheet will show:
A. non-current liabilities of $158,500.
B. current liabilities of $158,500.
C. non-current liabilities of $150,000 and current
liabilities of $8,500.
D. non-current liabilities of $135,000 and current
liabilities of $23,500.
E. None of the above
27. The IRS form used to calculate self-employment tax is
A. Schedule D.
B. Form 4797.
C. Form 4562.
D. Schedule SE
E. None of the above
28. For tax year 2007, the social security wage base was
A. $90,000
B. $94,200
C. $97,500
D. $102,000
E. None of the above
29. Which of the following is considered Schedule F farm income?
A. Cull breeding stock
B. Crop sales
C. Sales of farm equipment
D. Sale of land
E. All of the above
30. An LLC (Limited Liability Company) is usually
A. taxed like a corporation.
B. taxed like a partnership.
C. not for profit and therefore not taxed.
D. illegal in Missouri.
E. None of the above
31. The main difference between cash and accrual accounting is
that accrual accounting includes
A. a charge for unpaid family labor.
B. depreciation.
C. an adjustment for changes in inventory.
D. sales of assets.
E. None of the above
32. A farmer should issue an IRS Form 1099 for which of the
following?
A. $750 paid to a neighbor for hay.
B. $500 paid to a neighbor for custom work.
C. $1500 paid to a neighbor for a bull.
D. $650 paid to a neighbor for land rent.
E. All of the above
33. When required, you must send an IRS Form 1099-MISC to the
individual paid by
A. December 31.
B. January 31.
C. March 1.
D. April 15.
E. 90 days after payment.
Use the following information to answer questions 34-38.
The law of diminishing marginal physical product indicates that
as additional units of an input are used, the subsequent increase
in output decreases. Marginal analysis is used to determine the
point of profit maximization where the value of the marginal
product is equal to the marginal factor cost.
The following table indicates corn yield per acre to amount of
nitrogen fertilizer applied.
Nitrogen Corn
lbs./acre bu./acre
20 35
40 75
60 100
80 125
100 140
120 150
140 155
160 157
180 152
34. Corn response to nitrogen fertilizer first appears to obey
the law of diminishing marginal physical product when
nitrogen applied goes from
A. 0 to 20 pounds
B. 20 to 40 pounds
C. 40 to 60 pounds
D. 160 to 180 pounds
E. None of the above
35. If corn is $2.00 per bushel and the per unit cost of
nitrogen is $0.30 per pound, then the profit maximizing
level of nitrogen to apply per acre will be
A. 20
B. 120
C. 140
D. 160
E. None of the above
36. If corn is now $5.00 per bushel and the per unit cost of
nitrogen is $0.75 per pound, the profit maximizing level of
nitrogen to apply per acre will be
A. 20
B. 120
C. 140
D. 160
E. None of the above
37. Which corn price/nitrogen combination would result in more
nitrogen fertilizer being applied?
A. $1.60/$0.24
B. $2.00/$0.30
C. $3.00/$0.45
D. $5.00/$0.60
E. None of the above
38. If a farmer could buy better seed corn that would increase
the yield per acre by 5 bushels at each level of nitrogen
use, the profit maximizing level of nitrogen fertilizer
A. would increase.
B. would stay the same.
C. would decrease.
D. cannot be determined by the information provided.
E. None of the above
39. Which of the following should not affect a farmer's decision
to store his crop?
A. Interest rates
B. Shrinkage during storage
C. Anticipated price in the future
D. What he paid for his grain bin
E. None of the above
40. A acre equals
A. 0.40 hectares
B. 1.74 hectares
C. 2.47 hectares
D. 5.05 hectares
E. None of the above
Use the following information to answer questions 41-44
A farmer can produce a crop under contract and be guaranteed a
return of $100 per acre. If he does not produce the crop under
contract, there is a 50% chance he will make $150 per acre and a
50% chance he will make only $60 per acre.
41. What are his expected returns per acre if he produces all
the crop under contract?
A. $100
B. $105
C. $110
D. $150
E. None of the above
42. What are his expected returns per acre if he produces half
the crop under contract and half the crop without a
contract?
A. $100
B. $105
C. $110
D. $150
E. None of the above
43. What are his expected returns per acre if he produces all
the crop without a contract?
A. $100
B. $105
C. $110
D. $150
E. None of the above
44. A farmer who prefers to produce all his crop under contract
would be considered
A. risk averse.
B. risk neutral.
C. risk loving.
D. risk indifferent.
E. None of the above
45. The returns for a farmer who produces his crop under a
contract as compared to a farmer who produces none of his
crop under contract would be
A. more variable.
B. less variable.
C. always higher.
D. always lower.
E. None of the above
46. For an amortized loan, the amount of interest in the first
payment will be
A. more than the amount of the principal.
B. less than the amount of the principal.
C. equal to the amount of the principal.
D. dependent on the length of the loan.
E. None of the above
47. Crop prices increase, causing Marcia's sales income to
increase while leaving her cash operating expenses
unchanged. This will cause her capital turnover to
A. increase.
B. decrease.
C. not change.
D. Any of the above
E. None of the above
48. Average corn yields have historically increased at an annual
rate of 2%. If the current average is 150 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. 170.2 bushels
E. None of the above
49. What would you expect average corn yields to have been 5
years ago? (see Quest. 48)
A. 131.8 bushels
B. 134.7 bushels
C. 135.0 bushels
D. 135.9 bushels
E. None of the above
50. The carcass weight of a hog usually averages 76% of the live
weight at the time of slaughter. If it costs 55 cents per
pound to raise a hog to slaughter, what is the breakeven
carcass price?
A. $41.80/cwt.
B. $61.43/cwt.
C. $68.20/cwt.
D. $72.37/cwt.
E. None of the above
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2008 MISSOURI FFA FARM MANAGEMENT CONTEST
Problems Section
Choose the best answer and mark the corresponding numbered space
on the answer sheet. Computations may be done in the margins or
on the back of the paper. Each question is worth four (4)
points. There is only one correct answer for each question.
Answers have been rounded.
PROBLEM I - Market Value Balance Sheet
Using the information below, complete the net worth statement for
January 1, 2008:
Land . . . . . . . . . . . . . . . . . . . . . . . . $650,000
House . . . . . . . . . . . . . . . . . . . . . . . 80,000
Machinery and equipment. . . . . . . . . . . . . . . 310,000
Cows . . . . . . . . . . . . . . . . . . . . . . . . 51,000
Calves . . . . . . . . . . . . . . . . . . . . . . . 18,600
Accounts payable . . . . . . . . . . . . . . . . . . 5,100
Autos. . . . . . . . . . . . . . . . . . . . . . . . 47,000
Sows and boars . . . . . . . . . . . . . . . . . . . 45,000
Market hogs . . . . . . . . . . . . . . . . . . . . 140,000
Checking and savings . . . . . . . . . . . . . . . . 17,800
Corn . . . . . . . . . . . . . . . . . . . . . . . . 22,000
Hog buildings . . . . . . . . . . . . . . . . . . . 74,000
Feed and hay . . . . . . . . . . . . . . . . . . . . 12,500
Accounts receivable. . . . . . . . . . . . . . . . . 500
Accrued interest owed. . . . . . . . . . . . . . . . 24,740
Accrued taxes owed . . . . . . . . . . . . . . . . . 13,250
30-year land loan balance is $320,000.
$16,000 plus interest is due March 1 of each year.
7-year tractor loan balance is $44,000.
$11,000 plus interest is due November 30 of each year.
15-year home loan balance is $52,800.
$1,500 plus interest is due each quarter.
Current Assets: Current Liabilities:
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
Total ______________ Total _______________
Non-current Assets: Non-current Liabilities:
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
______________________________ ________________________________
Total ______________ Total __________________
Total Assets ________________ Total Liabilities ______________
Net Worth _________________
Questions 1 through 7 refer to PROBLEM I
1. The total value of current assets on January 1, 2008, was
A. $192,800
B. $210,900
C. $211,400
D. $336,400
E. None of the above
2. The total value of non-current assets was
A. $1,177,000
B. $1,210,000
C. $1,212,000
D. $1,257,000
E. None of the above
3. The total value of current liabilities was
A. $43,090
B. $58,950
C. $76,090
D. $92,590
E. None of the above
4. The total value of non-current liabilities was
A. $367,300
B. $383,800
C. $415,300
D. $416,800
E. None of the above
5. The net worth was
A. $873,200
B. $1,005,090
C. $1,257,000
D. $1,468,400
E. None of the above
6. The current ratio was
A. 0.31
B. 0.36
C. 2.78
D. 3.28
E. None of the above
7. The net working capital was
A. $118,810
B. $135,310
C. $211,400
D. $873,200
E. None of the above
PROBLEM II -- Enterprise Budget
Use the following soybean budget to answer Questions 8 through
16.
SOYBEANS, per acre, bottomland (loam soil), owned equipment
__________________________________________________________________
Operating Inputs Units Price Qty. Value Your Value Your Value
Soybean seed Lbs. 0.400 45.000 $18.00 _________
Nitrogen (N) Lbs. 0.500 15.000 7.50 _________
Phosphate (P2O5) Lbs. 0.600 40.00 24.00 _________
Potash (K2O) Lbs. 0.400 40.00 16.00 _________
Pre-emerg. herbicide Acre 14.020 1.000 14.02 _________
Post-emerg. herbicide Acre 4.690 1.000 4.69 _________
Rent fert. spreader Acre 2.350 1.000 2.35 _________
Annual operating capital Dol. 0.100 23.335 2.33 _________
Machinery labor Hour 10.000 2.027 20.27 _________
Mach. fuel, lube, repair Dol. 28.50 _________
Total operating costs $137.66 _________
Fixed costs
Machinery: Amount Value
Interest at 10% 184.00 18.40 _________
Depr., taxes, insurance 24.21 _________
Total fixed costs 42.61 _________
Production Units Price Quantity Value
Soybeans Bu. 7.50 36.00 270.00 _________
Total receipts 270.00
Returns above total operating costs 132.34 _________
Returns above all specified costs 89.73 _________
__________________________________________________________________
8. Total operating cost per acre is:
A. $2.33
B. $89.73
C. $132.34
D. $137.66
E. None of the above
9. The return above operating cost per acre is:
A. $42.61
B. $89.73
C. $132.34
D. $137.66
E. None of the above
10. How many pounds of fertilizer are budgeted per acre?
A. 11.35
B. 15.00
C. 44.00
D. 95.00
E. None of the above
11. What is the total budgeted interest cost per acre?
A. $2.33
B. $18.40
C. $20.73
D. $42.61
E. None of the above
12. What price per bushel is paid for seed beans?
A. $7.50
B. $18.00
C. $24.00
D. $45.00
E. None of the above
13. What is the total specified fertilization cost per acre?
(ignore cost of labor and operating capital)
A. $40.00
B. $47.50
C. $49.85
D. $90.00
E. None of the above
Recalculate the budget using a 7.5% interest rate and a $10.00
per bushel sales price for soybeans, then answer the next three
questions.
14. What yield will cause returns above all specified costs to
equal zero?
A. 10.70 bu.
B. 17.51 bu.
C. 21.13 bu.
D. 31.59 bu.
E. None of the above
15. What will be the per acre returns above all specified costs
if one-third of the 36-bushel crop must be given to the
landlord for rent of the land?
A. -$0.26
B. $8.32
C. $33.07
D. $64.91
E. None of the above
16. If one-third of the crop is given as rent, what price
received for soybeans will make the per acre receipts above
all specified costs equal zero?
A. $6.14
B. $6.91
C. $7.30
D. $7.51
E. None of the above
PROBLEM III -- Income Tax Management
Use the tables at the end of this exam to calculate depreciation
on the following item.
On March 1, 2007, Mary bought a new planter. Mary traded her old
planter which had a remaining book value of $3,025. Mary paid
$10,000 "down" and financed the remaining $15,000 over 3 years at
8% interest. She elected to roll the remaining basis of her old
planter into the new one.
17. The planter is
A. 3-year property
B. 5-year property
C. 7-year property
D. 10-year property
E. None of the above
18. If Mary does not expense any of the cost of the planter,
then 2007 depreciation will be (use regular MACRS and mid-
year convention)
A. $1,395.50
B. $2,500.00
C. $2,678.50
D. $3,002.60
E. None of the above
19. If Mary expenses $10,000 of the planter cost and uses the
mid-quarter convention and regular MACRS, then 2007
depreciation will be
A. $567.19
B. $2,414.09
C. $3,379.69
D. $5,254.69
E. None of the above
20. If Mary expenses the maximum allowable on the planter and
uses regular MACRS with the mid-year convention, then 1/1/08
remaining book value will be
A. $0
B. $324.10
C. $2,700.90
D. $4,276.18
E. None of the above
21. If Mary does not claim an expense deduction and uses the
mid-quarter convention and straight line depreciation
over the alternate MACRS life, her 2007 depreciation will
be
A. $380.50
B. $1,000.00
C. $1,401.25
D. $2,452.19
E. None of the above
22. Under MACRS, a pickup truck is classified as
A. 3-year property
B. 5-year property
C. 7-year property
D. 10-year property
E. None of the above
PROBLEM IV -- Supply and Demand
2008 State FFA Farm Management Graph for Exam
The above graph represents supply of pork for import into the
U.S. (SF) the supply of pork produced in the U.S. (SUS), the
total supply of pork in the U.S. (ST), the foreign demand for
U.S. pork (DF), the domestic demand for pork (DUS), and the
total demand for pork (DT) in the U.S.
23. What is the market equilibrium price of pork in the U.S.?
A. P1
B. P2
C. P3
D. P4
E. None of the above
24. At the market equilibrium price, how much pork will be
exported from the U.S.?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
25. At the market equilibrium price, how much pork will be
consumed in the U.S.?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
26. At what price would pork imports equal pork exports?
A. P1
B. P2
C. P3
D. P4
E. None of the above
For questions 27 and 28, assume the value of the U.S. dollar
weakens with respect to the currency of other major pork
trading countries.
27. The change will cause the U.S. pork imports to
A. increase.
B. decrease.
C. not change.
D. None of the above
28. As the dollar weakens, U.S. equilibrium price of pork
should
A. increase.
B. decrease.
C. stay the same.
D. None of the above
PROBLEM V - Marketing
In January, a farmer has 8,000 bushels of soybeans in the bin.
He sells the beans on April 25. Ignore commissions, storage
cost, and interest.
January 5 quotes: April 25 quotes:
May futures price = $9.86 May futures price = $10.20
Expected basis = $0.50 under Basis = $0.75 under
the Board the Board
Strike -May Premiums- -May Premiums-
price Call Put Call Put
$ 9.60 $0.43 $0.07 $0.33 $0.01
$ 9.80 $0.33 $0.14 $0.24 $0.03
$10.00 $0.24 $0.22 $0.16 $0.05
$10.20 $0.16 $0.31 $0.09 $0.11
$10.40 $0.09 $0.41 $0.04 $0.20
29. What is the cash price of beans on April 25?
A. $9.36
B. $9.45
C. $10.20
D. $10.95
E. None of the above
30. If the farmer sold one 5,000-bushel May futures contract
on January 5 and bought back the contract on April 25,
what would be the realized price per bushel (cash + net
on futures) for his soybeans?
A. $9.11
B. $9.24
C. $9.33
D. $9.45
E. None of the above
31. If the farmer sold two 5,000-bushel May futures contracts
on January 5 and bought both back on April 25, what would
be the realized price per bushel (cash + net on futures)
for his soybeans
A. $9.02
B. $9.11
C. $9.45
D. $9.87
E. None of the above
32. If the farmer bought one 5,000-bushel $9.80 Put on
January 5 and sold the Put on April 25, what would be the
realized price per bushel (cash + net on options) for his
soybeans?
A. $9.34
B. $9.38
C. $9.45
D. $9.52
E. None of the above
33. If the farmer bought two 5,000-bushel $9.80 Puts on
January 5, and sold the Puts April 25, what would be the
realized price per bushel (cash + net on options) for his
soybeans?
A. $9.31
B. $9.34
C. $9.38
D. $9.59
E. None of the above
34. If the farmer sold his soybeans on January 5 for $9.40
per bushel and bought one 5,000-bushel $9.80 May call,
then sold the Call on April 25, his realized price per
bushel (cash + net on options) would be:
A. $9.31
B. $9.34
C. $9.39
D. $9.46
E. None of the above
PROBLEM VI - Biofuels
Ethanol plants usually use corn to produce ethanol, dried
distillers grain with solubles (DDGS), and carbon dioxide. A
typical ethanol plant will produce 2.75 gallons of ethanol, 17
pounds of DDGS, and 17 pounds of carbon dioxide per bushel of
corn.
35. Missouri has several ethanol plants which have a rated
capacity of 45 million gallons of ethanol per year. How
many bushels of corn would a 45 million gallon ethanol
plant use per year operating at capacity?
A. 16.36 million bushels
B. 24.17 million bushels
C. 45.00 million bushels
D. 123.75 million bushels
E. None of the above
36. How many tons of DDGS would a 45 million gallon ethanol
plant produce per year operating at capacity?
A. 16,360 tons
B. 78,105 tons
C. 139,091 tons
D. 278,182 tons
E. None of the above
37. If, in addition to the cost of the corn, it costs 4 cents
per pound of corn to process corn through an ethanol
plant, what is the annual non-corn operating cost for a
45 million gallon plant?
A. $0.7 million
B. $7 million
C. $37 million
D. $108 million
E. None of the above
38. If ethanol is worth $2 per gallon, DDGS is worth $190 per
ton, and carbon dioxide is worth 0.5 cents per pound,
what is the value of the products from a bushel of corn
processed in a typical ethanol plant?
A. $4.96
B. $5.50
C. $7.20
D. $7.96
E. None of the above
39. If ethanol is worth $2 per gallon, DDGS is worth $190 per
ton, carbon dioxide is worth 0.5 cents per pound, and
operating costs are 4 cents per pound of corn, what is
the breakeven price a typical ethanol plant can pay for a
bushel of corn?
A. $4.06
B. $4.96
C. $5.72
D. $7.16
E. None of the above
PROBLEM VII - Time Value of Money
Use the following information to answer Questions 40-46.
Present Future Present
Value Value Value of
N of a $1 of a $1 Annuity
1 0.9346 1.0700 0.9346
2 0.8734 1.1449 1.8080
3 0.8163 1.2250 2.6243
4 0.7629 1.3108 3.3872
5 0.7130 1.4026 4.1002
6 0.6663 1.5007 4.7665
40. What is the present value of a dollar to be received in 4
years?
A. 71.30 cents
B. 76.29 cents
C. $1.31
D. $3.39
E. None of the above
41. A field of alfalfa will produce $1,000 during the first
year, $3,000 during each of the next 4 years and $1,500
in the sixth year. To the nearest dollar, what is the
present value of this income stream?
A. $11,431
B. $11,764
C. $12,301
D. $13,633
E. None of the above
42. A beef cow produces after-tax returns at the end of the
year of $70/year for 5 years and can be sold for $400
after-tax at the end of the fifth year. Assume the above
table uses the appropriate discount rate and determine
the current value of the cow to the nearest dollar.
A. $468
B. $478
C. $496
D. $572
E. None of the above
43. With one year of income remaining in the beef cow in
Question 42, how much should she be worth, to the nearest
dollar, using the above tables?
A. $406
B. $439
C. $455
D. $470
E. None of the above
44. If the farmer expects interest rates to decrease, but no
change in net returns to cattle, what impact is this
likely to have on the present value of the beef cow?
A. Decrease the present value
B. Increase the present value
C. Would not change the present value
D. Cannot tell
45. Use the table on the preceding page to calculate the
annual payment on a $20,000 loan amortized over 4 years.
A. $4,166.67
B. $5,244.94
C. $5,407.86
D. $5,904.58
E. None of the above
46. What discount rate is used in the above table?
A. 7.0%
B. 8.0%
C. 9.5%
D. 10.8%
E. None of the above
PROBLEM VIII - Exchange Rates
Canadian Mexican Japanese Chinese European
Dollars Pesos Yen Yuan Euros
per US$ per US$ per US$ per US$ per US$
Jan 00 1.45 9.49 105.3 8.28 0.987
Jan 05 1.22 11.26 103.3 8.28 0.762
Jan 06 1.16 10.54 115.5 8.07 0.825
Jan 07 1.18 10.96 120.5 7.79 0.770
Jan 08 1.01 10.91 107.8 7.24 0.679
Illinois Kansas Iowa Nebraska
Corn Wheat Pork Beef
$/bu. $/bu. $/cwt. $/cwt.
Jan 00 1.95 2.51 57.65 114.92
Jan 05 1.86 3.43 73.98 148.40
Jan 06 1.98 3.52 61.50 155.19
Jan 07 3.66 4.53 63.70 149.96
Jan 08 4.55 8.55 56.71 146.41
47. Valued in Japanese Yen, how much did Nebraska beef prices
increase from January 2000 to January 2007?
A. 14.0%
B. 30.5%
C. 36.8%
D. 49.3%
E. None of the above
48. Valued in Euros, how much did Illinois corn prices
increase from January 2000 to January 2008?
A. 60.5%
B. 82.1%
C. 107.6%
D. 133.3%
E. None of the above
49. Valued in Canadian dollars, how much did Iowa pork prices
decline from January 2000 to January 2008?
A. 1.6%
B. 12.1%
C. 31.5%
D. 45.0%
E. None of the above
50. Valued in Mexican pesos, how much did the price of Kansas
wheat increase from January 2000 to January 2008?
A. 240.6%
B. 291.6%
C. 340.6%
D. 391.6%
E. None of the above
ANNUAL DEPRECIATION PERCENTAGES FOR 5-YR PROPERTY, 150% DB
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 15.000% 26.250% 18.750% 11.250% 3.750%
2 25.500 22.125 24.375 26.625 28.875
3 17.850 16.520 17,062 18.637 20.212
4-5 16.660 16.520 16.763 16.567 16.404
6 8.330 2.065 6.287 10.354 14.355
Total 100.000 100.000 100.000 100.000 100.000
_________________________________________________________________
ANNUAL DEPRECIATION PERCENTAGES FOR 7-YR PROPERTY, 150% DB
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 10.714% 18.750% 13.393% 8.036% 2.679%
2 19.133 17.411 18.559 19.707 20.854
3 15.033 13.680 14.582 15.484 16.386
4 12.249 12.160 12.221 12.275 12.874
5-7 12.249 12.160 12.221 12.275 12.182
8 6.124 1.520 4.582 7.673 10.661
Total 100.000 100.000 100.000 100.000 100.000
_________________________________________________________________
ANNUAL FRACTIONS FOR STRAIGHT LINE OVER N YEARS (N less than 26)
_________________________________________________________________
MID-QUARTER CONVENTION
Tax MID-YEAR Quarter placed in service --
Year CONVENTION 1 2 3 4
1 1/2 7/8 5/8 3/8 1/8
2-N 1 1 1 1 1
N+1 1/2 1/8 3/8 5/8 7/8
_________________________________________________________________
Depreciation formula: Basis divided by N times number from above
table.
ANNUAL FRACTIONS FOR 27 1/2 YEAR PROPERTY, REGULAR MACRS
_________________________________________________________________
Tax Month Placed in Service --
Year 1 2 3 4 5 6 7 8 9 10 11 12
1 11.5 10.5 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5
2-27 12 12 12 12 12 12 12 12 12 12 12 12
28 6.5 7.5 8.5 9.5 10.5 11.5 12 12 12 12 12 12
29 -- -- -- -- -- -- 0.5 1.5 2.5 3.5 4.5 5.5
_________________________________________________________________
Depreciation formula: Basis divided by 27 1/2 divided by 12 times
number from above table.
ANNUAL FRACTIONS FOR 39 YEAR PROPERTY, REGULAR MACRS
_________________________________________________________________
Tax Month Placed in Service --
Year 1 2 3 4 5 6 7 8 9 10 11 12
1 11.5 10.5 9.5 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5
2-39 12 12 12 12 12 12 12 12 12 12 12 12
40 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10.5 11.5
_________________________________________________________________
Depreciation formula: Basis divided by 39 divided by 12 times number
from above table.
-----------------------------------------------------------------
2008 STATE FFA FARM MANAGEMENT CONTEST
Key
Multiple Choice
1. D 11. D 21. A 31. C 41. A
2. D 12. C 22. D 32. D 42. E
3. C 13. A 23. E 33. B 43. B
4. D 14. D 24. C 34. C 44. A
5. B 15. D 25. D 35. C 45. B
6. D 16. B 26. D 36. C 46. E
7. A 17. B 27. D 37. D 47. A
8. E 18. A 28. C 38. B 48. B
9. B 19. B 29. B 39. D 49. D
10. B 20. C 30. B 40. A 50. D
Problems
1. C 11. C 21. D 31. A 41. A
2. D 12. C 22. B 32. B 42. D
3. C 13. C 23. C 33. A 43. B
4. B 14. B 24. B 34. B 44. B
5. E 15. D 25. C 35. A 45. D
6. C 16. C 26. D 36. C 46. A
7. B 17. C 27. B 37. C 47. D
8. D 18. D 28. A 38. C 48. A
9. C 19. C 29. B 39. B 49. C
10. D 20. C 30. B 40. B 50. B
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