2009 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. Pat Parker had a net farm income of $35,000. Pat had total business
assets of $500,000 and total liabilities of $300,000. Pat paid $32,000
in interest. The rate of return on assets would be
A. 6.4%.
B. 7.0%.
C. 13.4%.
D. 17.5%.
E. None of the above
2. If corn costs $3.50 per bushel and has 13% moisture, and dried
distillers grain with solubles (DDGS) costs $120/ton and has 10%
moisture, and modified wet distillers grain with solubles (MWDGS) costs
$55/ton and has 52% moisture, and wet distillers grain with solubles
(WDGS) costs $38/ton and has 63% moisture, which has the lowest cost
per pound of dry matter?
A. Corn
B. DDGS
C. MWDGS
D. WDGS
E. Cannot determine
3. If the Chicago Board of Trade website indicates today's open for the
July corn futures contract was 372'6, what price is this?
A. $372.6 per ton
B. $372.6 per metric ton
C. $3.726 per bushel
D. $3.7275 per bushel
E. None of the above
4. A farmer purchases feeder pigs averaging 40 pounds each and sells them
as slaughter hogs with an average weight of 270 pounds. The feed cost
is $71.50 per hog. What is the feed cost per pound of gain?
A. $0.265
B. $0.292
C. $0.311
D. $0.420
E. None of the above
5. On February 1 Janice borrowed $5,000 to buy feeder pigs. On July 1 she
repaid the $5,000 along with $204.17 interest. What annual interest
rate did she pay?
A. 9.80%
B. 10.25%
C. 11.33%
D. 12.25%
E. None of the above
6. A cattle buyer purchases 40 head of steers which average 1,265 pounds
for $79.40/cwt. He trucks them 352 miles to a slaughter plant where he
sells them on a carcass basis for 125 cents per pound. His trucking
and handling costs are $672. What average carcass weight does he need
in order to break even?
A. 806 pounds
B. 811 pounds
C. 817 pounds
D. 896 pounds
E. None of the above
7. You are having a good business year and it looks as if taxable income
is going to be a lot more than it was last year. Which of the
following steps would be the best tax management before the end of the
tax year?
A. Buy $20,000 of feeders
B. Postpone buying the $45,000 tractor until next year
C. Buy $15,000 worth of fertilizer for the next crop year
D. Sell 5,000 bushels of corn right now
E. Put up a $15,000 pole barn this year
8. The maximum Section 179 Expensing deduction for 2008 was
A. $25,000.
B. $100,000.
C. $200,000.
D. $250,000.
E. None of the above
9. A farmer who buys feeder pigs could use the options market to reduce
his price risk by
A. buying a hog Put option.
B. selling a hog Put option.
C. buying a hog Call option.
D. selling a hog Call option.
E. All of the above
10. Farmer Jones has $10,000 in equipment he uses exclusively for corn. He
assumes that this equipment will last 5 years and have a salvage value
of $0. He plans to plant 125 acres of corn each year. Assuming an
interest rate of 10%, what will be his average fixed costs per year for
the next 5 years (depreciation and interest) for his machinery per acre
of corn?
A. $15
B. $20
C. $24
D. $25
E. None of the above
Use the following information to answer questions 11-13.
Farmer Jones has received the following information for his tillage practices
from the Soil Conservation Service:
(tons/acre/year) ($/acre)
Corn after soybeans 8 T. $100
Soybeans after corn 3 T. $100
Soybeans after soybeans 12 T. $110
Wheat after soybeans 6 T. $80
Corn after wheat 4 T. $90
11. Which of the following crop rotations will average 5 tons or less of
soil loss per acre per year?
A. Corn-soybeans-wheat
B. Corn-soybeans
C. Corn-soybeans-soybeans
D. Continuous soybeans
E. None of the above
12. What will be the average cash returns for a corn-soybean-wheat crop
rotation?
A. $90
B. $93
C. $97
D. $100
E. None of the above
13. Which crop sequence would have the highest average annual cash returns?
A. Corn-soybeans-wheat
B. Corn-soybeans
C. Corn-soybeans-soybeans
D. Continuous soybeans
E. Corn-soybeans-soybeans-wheat
14. The demand for food is usually considered an inelastic demand. This
implies that for a given percentage change in price,
A. the percentage change in quantity demanded is less.
B. the percentage change in quantity demanded is greater.
C. the percentage change in quantity supplied is less.
D. the percentage change in quantity supplied is more.
E. None of the above
15. The demand for an item with many possible substitutes is _________ than
the demand for an item with few substitutes.
A. more elastic
B. less elastic
C. less
D. more
E. None of the above
16. The rate of return to equity will be highest when
A. the interest rate on borrowed funds is less than the rate of
return to assets.
B. the interest rate on borrowed funds is equal to the rate of
return to assets.
C. the interest rate on borrowed funds is greater than the rate
of return to assets.
D. equity is 50% of total assets.
E. None of the above
17. Which of the following statements regarding equity is not true?
A. Equity = net worth
B. Equity = total assets minus total liabilities
C. Equity can be less than zero.
D. Equity cannot be greater than total assets.
E. Equity must always be less than total liabilities.
18. If the supply of a good is inelastic, a 10% change in the price of the
good would produce a change in the quantity supplied of
A. 10%.
B. more than 10%.
C. less than 10%.
D. 0%.
E. None of the above
19. The total consumer demand and producer supply of leechynuts were equal
to 1 million nuts when the price was $1 per nut last year. This year
the price is $1.25. Which of the following statements is true?
A. More than 1 million leechynuts will be supplied.
B. Less than 1 million leechynuts will be supplied.
C. More than 1 million leechynuts will be demanded.
D. Less than 1 million leechynuts will be demanded.
E. Not enough information given to determine quantity supplied or
demanded.
20. You are driving down a Missouri county road, exercising resonable care,
when you run into a stray hog standing on the road. You suffer car
damages of $3,500 and the hog (valued at $120) is dead.
A. The hog owner is presumed to be negligent.
B. You will have to prove the hog owner to have been negligent.
C. You will have to pay the hog farmer for his hog.
D. You can collect double damages if you can prove the hog owner
failed to maintain lawful fences.
E. None of the above
21. If an investment doubled in value in 10 years, its average annual
return was
A. 6.7%.
B. 7.2%.
C. 8.8%.
D. 10.0%.
E. None of the above
22. For tax year 2008, the social security wage base was
A. $94,000
B. $97,500
C. $102,000
D. $106,800
E. None of the above
23. For income tax purposes, depreciation charges are
A. deducted from the total tax liability.
B. added to investment credit.
C. deducted from operating income.
D. deducted from capital sales.
E. None of the above
24. The farm return to land, labor, and capital for a year would be found
on
A. the balance sheet.
B. the cash flow budget.
C. the income statement.
D. a partial budget.
E. None of the above
25. Return to management is net cash farm income
A. minus debt payments.
B. minus the value of unpaid labor, depreciation, interest on
equity capital, and net inventory changes.
C. minus value of operator's labor and interest on debt payments.
D. minus the interest on equity capital, depreciation, and
adjustments for inventory changes.
E. None of the above
26. How many total acres are included in the "SE 1/4 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
27. 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
28. Return to operator's labor and management is net farm income
A. minus debt payments.
B. minus the value of operator's labor, depreciation, interest on
equity capital, and debt payments.
C. minus the value of operator's labor and interest on debt
payments.
D. minus the interest on equity capital.
E. plus interest paid.
29. A farmer purchases 550-pound feeder steers for $1.10 per pound and
plans to sell the steers at 750 pounds. The farmer estimates the total
cost of gain to be 70 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. $99.33/cwt.
D. $105.33/cwt.
E. None of the above
30. Corn has an expected yield of 155 bushels per acre and a production
cost of $300.00 per acre. Expected market prices are $4.00 per bushel
for corn and $10.00 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. 32.0 bushels
B. 36.4 bushels
C. 45.3 bushels
D. 47.0 bushels
E. None of the above
31. The effect of appreciation in an asset's value, such as an increase in
land value
A. will be accounted for by a larger cash income value in the
cash flow statement.
B. will be accounted for by smaller added expense figures in the
cash flow statement because depreciation would not be
subtracted.
C. will be accounted for by smaller cash expense value in the
cash flow statement.
D. is not shown on the cash flow statement.
32. Inflation means
A. a dollar will buy more in the future than it will buy today.
B. the prices at which the interest rate will equal the inflation
ratio.
C. a farmer's profit margin will increase over time due to higher
prices.
D. a dollar will buy less in the future than it will buy today.
33. How many pounds of 48% protein soybean meal must be mixed with 8%
protein corn 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
34. Corn and grain sorghum are substitutes for each other in many livestock
feed rations. Assuming they are substitutes, a decrease in the supply
of corn would cause the demand for grain sorghum to
A. shift to the left.
B. shift to the right.
C. decrease.
D. remain unchanged.
35. Accrued interest on a balance sheet refers to
A. interest that is past due.
B. interest that has accumulated since the last loan payment.
C. interest on short-term debt.
D. interest forgiven by the lender.
E. None of the above
36. A livestock producer wishing to use the futures market to hedge the
price of cattle he anticipates selling in the future would initially
A. buy futures contracts expecting to sell the contracts when he
sells his cattle.
B. buy futures contracts expecting to buy more contracts when he
sells his cattle.
C. sell futures contracts expecting to buy them back when he
sells his cattle.
D. sell futures contracts expecting to sell more contracts when
he sells his cattle.
37. You have borrowed $40,000 at a simple annual interest rate of 10% per
annum for 4 years. Principal is to be repaid in 4 equal installments
at the end of each year, with annual interest payable with the
principal payment. The payment due at the end of the first year would
be
A. $4,000
B. $10,000
C. $14,000
D. $44,000
E. None of the above
38. Capital used in a farmer's beef breeding herd could be invested in
stocks, bonds, land, or some other asset. This illustrates the
principal of
A. marginal cost.
B. fixed cost.
C. opportunity cost.
D. variable cost.
E. alternative cost.
39. A soybean producer decides to store his soybeans in the local elevator
for five months. The price at harvest is $9.00 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 $45,000 at 8% 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. $9.15
B. $9.30
C. $9.45
D. $9.87
E. None of the above
40. In a livestock enterprise budget prepared on July 1, home-grown feed
A. should not be included as a cost.
B. should be included, valued at its net market price.
C. should be included valued at its cost of production.
D. should be valued at past year's inventory value.
41. The law of supply states that
A. as a product price increases, a larger quantity will be
consumed.
B. as a product price increases, a smaller quantity will be
consumed.
C. as product price increases, a smaller quantity will be
supplied.
D. as product price decreases, a smaller quantity will be
supplied.
E. None of the above
Indicated below are data for the feed production response of slaughter hogs.
It will be used for Questions 42-44.
Production Weight of hogs Feed fed
level (pounds) (pounds)
1 190 722
2 210 819
3 230 920
4 250 1030
5 270 1150
6 290 1294
42. Suppose the cost of the mixed hog feed is $150 per ton. The expected
hog price is $47 per hundredweight. What is the profit maximizing
level of production (assuming all other costs are constant and the hog
price does not change as weight changes).
A. Level 2
B. Level 3
C. Level 4
D. Level 5
E. Level 6
43. If hog prices and feed costs both double, what impact will that have on
the profit maximizing level of production (assuming all other costs are
constant)?
A. Sell hogs at a heavier weight
B. Sell hogs at a lighter weight
C. No impact, will stay at same level
44. With hogs at $50/cwt., how high would the cost of a pound of hog feed
have to be before you would produce a 250-pound hog rather than a 270-
pound hog?
A. above 8.0 cents
B. above 8.3 cents
C. above 8.7 cents
D. above 9.0 cents
E. above 10.0 cents
45. The Universal Soil Loss Equation estimates soil erosion in tons per
acre per year =
R (rainfall factor) x K (soil erodibility factor) x LS (combination of
slope percentage and slope length) x C (crop management factor) x P
(conservation practice factor). The P factor for contour farming is
0.5. This indicates
A. Contour farming causes 0.5 tons of soil loss per acre per
year.
B. Contour farming increases soil loss by 50% per acre per year.
C. Contour farming reduces soil loss by 50% per acre per year.
D. Contour farming would have no impact on the Universal Soil
Loss Equation estimate.
E. Contour farming would reduce yields by 50% per acre per year.
46. A deduction that allows an owner or operator to account for the
reduction of a product's reserves is called
A. depreciation.
B. depletion.
C. amortization.
D. investment credit.
E. None of these
47. If anhydrous ammonia (NH3) is 82.3% nitrogen by weight and is selling
for $800 per ton, what is the cost per pound of actual N?
A. $0.53
B. $0.49
C. $0.40
D. $0.33
E. None of the above
48. The carcass weight of a hog usually averages 76% of the live weight at
the time of slaughter. If it costs 50 cents per pound to raise a hog
to slaughter, what is the breakeven carcass price?
A. $38.00/cwt.
B. $65.79/cwt.
C. $68.20/cwt.
D. $72.37/cwt.
E. None of the above
49. Understating the amount of debt on a net worth statement results in
A. a smaller net worth figure than should be.
B. lower interest costs.
C. a smaller debt-to-equity ratio.
D. None of the above
50. Which of the following can influence the value of land?
A. Its productivity potential
B. Location
C. Interest rates
D. Inflation rates
E. All of the above
2009 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,
2009:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . $650,000
House . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000
Machinery and equipment . . . . . . . . . . . . . . . . . 212,000
Cows . . . . . . . . . . . . . . . . . . . . . . . . . . 51,000
Calves . . . . . . . . . . . . . . . . . . . . . . . . . 18,600
Accounts payable. . . . . . . . . . . . . . . . . . . . . 7,562
Autos . . . . . . . . . . . . . . . . . . . . . . . . . . 47,000
Sows and boars. . . . . . . . . . . . . . . . . . . . . . 40,000
Market hogs . . . . . . . . . . . . . . . . . . . . . . 130,000
Checking and savings. . . . . . . . . . . . . . . . . . . 17,800
Soybeans. . . . . . . . . . . . . . . . . . . . . . . . . 22,000
Hog buildings . . . . . . . . . . . . . . . . . . . . . . 55,000
Feed and hay. . . . . . . . . . . . . . . . . . . . . . . 12,500
Operating loan balance. . . . . . . . . . . . . . . . . . 98,000
Accounts receivable . . . . . . . . . . . . . . . . . . . 500
Accrued interest owed . . . . . . . . . . . . . . . . . . 24,740
Accrued taxes owed. . . . . . . . . . . . . . . . . . . . 9,700
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 $26,000.
$6,500 plus interest is due November 30 of each year.
30-year home loan balance is $52,500.
$500 plus interest is due each month.
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, 2009, was
A. $200,900
B. $201,400
C. $241,400
D. $292,400
E. None of the above
2. The total value of non-current assets was
A. $1,084,000
B. $1,124,000
C. $1,135,000
D. $1,175,000
E. None of the above
3. The total value of current liabilities was
A. $42,002
B. $70,502
C. $163,002
D. $168,502
E. None of the above
4. The total value of non-current liabilities was
A. $370,000
B. $375,500
C. $468,000
D. $473,500
E. None of the above
5. The net worth was
A. $873,512
B. $1,005,090
C. $1,257,000
D. $1,468,400
E. None of the above
6. The current ratio was
A. 0.84
B. 1.20
C. 2.86
D. 3.28
E. None of the above
7. What would the value of farm production need to be in order to have a
capital turnover ratio of 0.3?
A. $118,810
B. $135,310
C. $412,920
D. $873,200
E. None of the above
PROBLEM II -- Enterprise Budget
Use the following wheat budget to answer Questions 8 through 16.
WHEAT, per acre
_______________________________________________________________________
Operating Inputs Units Price Qty. Value Your Value
Wheat seed Bu. 10.500 1.666 $ 17.49 __________
Fertilizer Lbs. 0.900 140.000 126.00 __________
Lime Ton 20.000 0.250 5.00 __________
Insecticide/fungicide Oz. 2.000 9.000 18.00 __________
Herbicide Oz. 20.000 0.300 6.00 __________
Rent fert. spreader Acre 2.440 1.000 2.44 __________
Annual operating capital Dol. 0.085 94.100 8.00 __________
Machinery labor Hour 10.000 1.000 10.00 __________
Other labor Hour 10.000 0.250 2.50 __________
Mach. fuel, lube, repair Dol. 20.49 __________
Total operating costs $215.92 __________
Fixed costs, machinery
Interest Dol. 0.085 171.41 14.57 __________
Depr., taxes, insurance Dol. 23.38 __________
Total fixed costs 37.95 __________
Production
Wheat Bu. 6.00 55.00 330.00 __________
Small grain pasture AUMs 11.00 1. 11.00 __________
Total receipts 341.00 __________
Returns above total operating costs 125.08 __________
Returns above all specified costs 87.13 __________
_______________________________________________________________________
8. Total operating cost per acre is:
A. $87.13
B. $94.10
C. $125.08
D. $215.92
E. None of the above
9. The return above operating cost per acre is:
A. $87.13
B. $94.10
C. $125.08
D. $215.92
E. None of the above
10. The budget includes no government payments. Given the expected price
of wheat, the most likely payment would be
A. fixed (direct) payment.
B. counter-cyclical payment.
C. loan deficiency payment.
D. trigger price payment.
E. No government payment is likely
11. What is the total budgeted interest cost per acre?
A. $2.44
B. $14.57
C. $22.57
D. $37.95
E. None of the above
12. What price per bushel is paid for seed wheat?
A. $6.00
B. $10.50
C. $17.49
D. $55.00
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. $126.00
C. $131.00
D. $133.44
E. None of the above
14. The budget includes no charge for land. If one-third of the crop is
given as rent, what price received for wheat will make the per acre
receipts above all specified costs equal zero?
A. $6.14
B. $6.62
C. $6.92
D. $7.30
E. None of the above
15. What yield will cause returns above all specified costs to equal zero
if $70/acre is paid for land rent?
A. 52.15 bu.
B. 53.98 bu.
C. 55.07 bu.
D. 58.89 bu.
E. None of the above
16. What will be the per acre returns above all specified costs if one-
third of the 55-bushel crop is given to the landlord for rent of the
land and no grazing occurs?
A. -$33.87
B. -$22.87
C. -$3.13
D. $17.13
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 May 1, 2008, Mark bought a new tractor. Mark traded his old tractor
which had a remaining book value of $7,155. Mark paid $25,000 "down" and
financed the remaining $30,000 over 5 years at 8% interest. He elected to
roll the remaining basis of his old tractor into the new one.
17. The tractor is
A. 3-year property
B. 5-year property
C. 7-year property
D. 10-year property
E. None of the above
18. If Mark does not expense any of the cost of the tractor, then 2008
depreciation will be (use regular MACRS and mid-year convention)
A. $3,445.09
B. $4,949.30
C. $5,892.70
D. $6,659.29
E. None of the above
19. If Mark expenses $10,000 of the tractor cost and uses the mid-
quarter convention and regular MACRS, then 2008 depreciation will be
A. $1,339.30
B. $5,587.89
C. $6,985.12
D. $9,779.06
E. None of the above
20. If Mark expenses the maximum allowable on the tractor and uses
regular MACRS with the mid-year convention, then 1/1/09 remaining
book value will be
A. $0
B. $766.59
C. $3,445.09
D. $6,388.41
E. None of the above
21. If Mark does not claim an expense deduction and uses the mid-quarter
convention and straight line depreciation over the alternate MACRS
life, his 2008 depreciation will be
A. $3,107.75
B. $3,884.69
C. $4,439.64
D. $5,549.55
E. None of the above
22. Under MACRS, a farm fence 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
(Graph is in separate file)
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 imported 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 strengthens
with respect to the currency of other major pork trading countries.
27. The change will cause the U.S. pork exports to
A. increase.
B. decrease.
C. not change.
D. None of the above
28. As the dollar strengthens, U.S. equilibrium price of pork should
A. increase.
B. decrease.
C. stay the same.
D. None of the above
PROBLEM V - Marketing
On July 10, a farmer has 10,000 bushels of wheat in his bins. He sells it
on January 15. Ignore commissions, storage cost, and interest.
July 10 quotes: January 15 quotes:
March futures price = $6.50 March futures price = $6.00
Expected basis = $0.10 under the board Basis = $0.05 under the board
Strike ---- Premiums ---- ---- Premiums ----
price Call Put Call Put
$6.10 $0.73 $0.01 $0.58 $0.01
$6.20 $0.63 $0.02 $0.48 $0.02
$6.30 $0.53 $0.03 $0.38 $0.04
$6.40 $0.43 $0.08 $0.28 $0.11
$6.50 $0.33 $0.15 $0.19 $0.19
$6.60 $0.24 $0.24 $0.12 $0.29
29. What is the cash price of wheat on January 15?
A. $5.95
B. $6.00
C. $6.05
D. $6.10
E. None of the above
30. If the farmer sold two March futures contracts on July 10 and bought
back the contracts on January 15, what would be the realized price
per bushel (cash + net on futures) for the wheat?
A. $6.35
B. $6.40
C. $6.45
D. $6.50
E. None of the above
31. If the farmer bought two $6.40 Puts on July 10 and sold the Puts on
January 15, what would be the realized price per bushel (cash + net
on options) for his wheat?
A. $5.90
B. $5.92
C. $5.98
D. $6.00
E. None of the above
32. If the farmer bought two $6.40 Puts and sold two $6.40 Calls on July
10, and sold the Puts and bought back the Calls on January 15, what
would be the realized price per bushel (cash + net on options) for
his wheat?
A. $6.05
B. $6.13
C. $6.20
D. $6.25
E. None of the above
33. Given all the information above, which of the following actions taken
on July 10 turned out to be the most profitable?
A. Selling two futures contracts.
B. Buying two $6.40 Put options.
C. Buying two $6.40 Puts and selling two $6.40 Calls.
D. Selling the wheat on July 10.
E. Taking no market action.
PROBLEM VI - Loan Payments
Loan Amortization: You have a $25,000 loan to be paid back over 10 periods
in equal payments.
Outstanding Payment Payment
Principal Loan Portion Portion
Period before Payment Payment Interest Principal
1 $25,000.00 $3,725.74 A $1,725.74
2 $23,274.26 $3,725.74 $1,861.94 $1,863.80
3 $21,410.46 $3,725.74 $1,712.84 B
4 $19,397.56 $3,725.74 $1,551.80 $2,173.94
5 C $3,725.74 $1,377.89 $2,347.85
6 $14,875.77 $3,725.74 $1,190.07 D
7 $12,340.10 $3,725.74 $ 987.21 $2,738.53
34. The value of A is
A. $1,933.61
B. $1,957.29
C. $1,986.14
D. $2,000.00
E. None of the above
35. The value for B is
A. $1,989.13
B. $2,000.77
C. $2,012.90
D. $2,087.05
E. None of the above
36. The value for C is
A. $16,951.88
B. $17,223.62
C. $17,317.19
D. $17,846.25
E. None of the above
37. What interest rate is used for this loan?
A. 7.00%
B. 7.75%
C. 8.00%
D. 17.74%
E. None of the above
38. Using the interest rate in the table on the previous page as the
discount rate, what is the present value of an annuity of
$3,725.74 for 8 years?
A. $19,397.56
B. $20,519.66
C. $21,410.46
D. $29,805.84
E. None of the above
39. At the beginning of last year, a farmer had an outstanding loan for
$192,750. The interest rate was 8% APR. If the farmer made one loan
payment at the end of the year of $30,000, what was the outstanding
balance at the end of the year?
A. $17,398
B. $178,170
C. $199,873
D. $204,228
E. None of the above
PROBLEM VII - Diminishing Returns
A farmer is looking at a precision ag firm that can apply fertilizer in 10
lb. increments. The cost of fertilizer is $0.80/lb. Corn is selling for
$3.80 per bushel. He has one field that is a mix of Soils A and B. The
field is 80 acres with 30 acres of Soil A and 50 acres of Soil B. He has
determined that his yields will respond according to the following table.
Fertilizer Soil A yld. Soil B yld.
lbs./ac. bu./ac. bu./ac.
120 100 120
130 105 128
140 108 134
150 110 138
160 111 141
170 112 143
40. How much fertilizer should he apply per acre if he fertilizes the
entire field based on Soil Type A?
A. 130 lbs.
B. 140 lbs.
C. 150 lbs.
D. 160 lbs.
E. None of the above
41. What are his net returns above fertilizer cost for the entire field if
he fertilizes the entire field based on Soil A?
A. $28,407
B. $28,812
C. $29,204
D. $29,668
E. None of the above
42. How much fertilizer should he apply per acre if he fertilizes the
entire field based on Soil Type B?
A. 140 lbs.
B. 150 lbs.
C. 160 lbs.
D. 170 lbs.
E. None of the above
43. What are his net returns above fertilizer cost for the entire field if
he fertilizes the entire field based on Soil B?
A. $28,407
B. $28,812
C. $29,204
D. $29,668
E. None of the above
44. What are his returns above fertilizer costs for the entire field if he
fertilizes by applying the profit maximizing amount on each soil type?
A. $29,342
B. $29,688
C. $30,015
D. $30,767
E. None of the above
PROBLEM VIII - Cost Analysis
A local business can produce up to 7 widgets per hour. The partially
completed table below shows some of their cost data. Complete the cost
table then answer questions 45-50. Round all numbers to the nearest tenth.
: : : : :Average: Average : :
: Total : Fixed :Variable: Total : Fixed : Variable :Marginal:
Quantity : Cost : Cost : Cost : Cost : Cost : Cost : Cost :
_________:_______:_______:________:_______:_______:__________:________:
0
---------:-------:-------:--------:-------:-------:----------:---------
1 A 7
---------:-------:-------:--------:-------:-------:----------:---------
2 65 15
---------:-------:-------:--------:-------:-------:----------:---------
3 8 F
---------:-------:-------:--------:-------:-------:----------:---------
4 B D 11
---------:-------:-------:--------:-------:-------:----------:---------
5 100 E
---------:-------:-------:--------:-------:-------:----------:---------
6 70 C
---------:-------:-------:--------:-------:-------:----------:---------
7 21
---------:-------:-------:--------:-------:-------:----------:---------
45. What is the value of A?
A. 25
B. 30
C. 40
D. 50
E. None of the above
46. What is the value of B?
A. 74
B. 80
C. 85
D. 90
E. None of the above
47. What is the value of C?
A. 16
B. 18
C. 20
D. 22
E. None of the above
48. What is the value of D?
A. 10.0
B. 12.5
C. 15.0
D. 20.0
E. None of the above
49. What is the value of E?
A. 7
B. 8
C. 9
D. 10
E. None of the above
50. What is the value of F?
A. 8
B. 9
C. 10
D. 11
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.
********************************************************************
2009 STATE FFA FARM MANAGEMENT CONTEST
Key
Multiple Choice
1. C 11. A 21. B 31. D 41. D
2. D 12. A 22. C 32. D 42. D
3. D 13. D 23. C 33. B 43. C
4. C 14. A 24. C 34. B 44. B
5. A 15. A 25. B 35. B 45. C
6. C 16. A 26. A 36. C 46. B
7. C 17. E 27. A 37. C 47. B
8. D 18. C 28. D 38. C 48. B
9. A 19. E 29. C 39. C 49. C
10. B 20. A 30. D 40. B 50. E
Problems
1. B 11. C 21. B 31. C 41. B
2. D 12. B 22. C 32. B 42. C
3. D 13. D 23. C 33. A 43. C
4. A 14. B 24. B 34. D 44. A
5. E 15. A 25. C 35. C 45. D
6. B 16. A 26. D 36. B 46. C
7. C 17. C 27. B 37. C 47. C
8. D 18. D 28. B 38. C 48. B
9. C 19. C 29. A 39. B 49. D
10. A 20. D 30. C 40. B 50. B
|
