2011 DISTRICT 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. There is
only one correct answer for each question. Choose the best answer and mark the appropriate
box on the score sheet provided.
1. How many total acres are included in the "S 1/2 of the NE 1/4 of
the SE 1/4 and the N 1/2
of the SE 1/4 of the SE 1/4 of Section 15, Twp. 10N, R4W of the 5th Principle Meridian"?
A. 40 acres
B. 80 acres
C. 120 acres
D. 160 acres
E. None of the above
2. How much perimeter fence would be required to completely enclose the parcel of land
described in the question above?
A. 1.0 mile
B. 1.5 miles
C. 2.0 miles
D. 2.5 miles
E. None of the above
3. A township is six miles square and includes
A. 6 sections.
B. 36 sections.
C. 40 sections.
D. 160 sections.
E. None of the above
4. The main difference between a joint tenancy and tenancy in common is
A. the surviving joint tenant will eventually own all of the land as a result of right
of survivorship.
B. the surviving tenant in common will eventually own all the land as a result of
right of survivorship.
C. only husbands and wives may be joint tenants.
D. tenants in common must own equal shares of the property while joint tenants
may own unequal shares (i.e., H owns 1/4 and W owns 3/4).
E. None of the above
5. Cooperatives pay patronage refunds according to
A. one man, one vote.
B. size of farm.
C. amount of business done by patron.
D. total assets.
E. All of the above
6. A producer is thinking about storing his corn in the local elevator for 5 months. The price
at harvest is $5.20 per bushel and the elevator charges 2 cents per bushel per month for
storage plus a 5 cent per bushel handling charge. He has 5,000 bushels to sell and would
need to borrow $30,000 at 6% annual interest while he stores the corn. What price must
he receive for his corn to break even and cover his storage and opportunity costs?
A. $5.35
B. $5.48
C. $5.53
D. $5.61
E. None of the above
7. Corn has an expected yield of 150 bushels per acre and a production cost of $350.00 per
acre. Expected market prices are $5.40 per bushel for corn and $13.00 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. 36.7 bushels
B. 37.3 bushels
C. 40.2 bushels
D. 46.9 bushels
E. None of the above
8. If high oil corn has the same production cost per acre as regular corn but can be sold for
15 cents per bushel more, what yield of high oil corn is needed to equal 155 bushels of
regular corn at $5.40 per bushel?
A. 145.9 bushels
B. 148.4 bushels
C. 150.8 bushels
D. 152.6 bushels
E. None of the above
9. How many pounds of 48% protein soybean meal must be mixed with 11% protein wheat
to make a ton of 17% protein feed?
A. 324 pounds
B. 368 pounds
C. 439 pounds
D. 1,676 pounds
E. None of the above
10. Due to a sharp increase in hog numbers, average hog prices were much lower in 2008
than in 2007. Demand for corn to feed to hogs _____________ in 2008 compared to
2007.
A. increased
B. decreased
C. did not change
11. The Pig Palace Custom Feedlot purchased a group of weaner pigs weighing 12 pounds
each and sold them weighing 270 pounds after feeding them for 175 days. Each pig ate
760 pounds of feed during the feeding period. Average daily gain for each pig in the
group during the feeding period was
A. 1.47 pounds per day.
B. 1.67 pounds per day.
C. 2.08 pounds per day.
D. 3.25 pounds per day.
E. None of the above
12. A farmer purchases 600-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 80 cents per pound.
The nearest breakeven price when the steers are sold at 750 pounds is
A. $0.95/pound
B. $1.00/pound
C. $1.12/pound
D. $1.20/pound
E. None of the above
13. A feedlot operator purchases a pen of 115 feeder steers with an average weight of 780
pounds and sells them at an average weight of 1280 pounds. Total feed cost for the pen is
$45,500. Feed cost per pound of gain is equal to
A. $0.648
B. $0.720
C. $0.791
D. $0.910
E. None of the above
14. A producer sells 8 feeder steers for $124/cwt. The average weight per steer is 752
pounds. There is a 2% sales commission and yardage fees of $3.10 per head. The net
amount received for the pen of steers would be
A. $6,027.60
B. $6,028.36
C. $7,049.62
D. $7,285.84
E. None of the above
15. A farmer is purchasing a new baler at a cost of $32,000. His dealer will finance the baler
under the following terms: 20% down payment with the balance repaid in equal
payments over the next 6 years at 7% APR. The farmer expects the baler to last for 8
years and have a salvage value of $6,000. How much interest will the farmer pay the first
year of the loan?
A. $1,120
B. $1,400
C. $1,456
D. $1,792
E. None of the above
16. A charge for capital used in a farmer's cattle herd is usually included in an enterprise
budget regardless of whether he borrowed money to buy the cows or not. This illustrates
the principle of
A. marginal cost.
B. fixed cost.
C. opportunity cost.
D. variable cost.
E. alternative cost.
17. A feedlot operator buys feeder steers, finishes them, and sells them. The operator
estimates that finished steers will sell for $97 per cwt. and that it will cost $270 per head
to bring them from the 750 pound purchase weight to the 1100 pound selling weight.
What is the highest price the operator can pay for 750 pound feeder steers to break even?
A. $106.27/cwt.
B. $109.54/cwt.
C. $111.05/cwt.
D. $115.96/cwt.
E. None of the above
18. On March 1, 2010, Anna borrowed $5,000 to buy bedding plants. On September 1, 2010,
she repaid the $5,000 along with $162.50 interest. What annual interest rate did she pay?
A. 6.0%
B. 6.5%
C. 7.0%
D. 7.5%
E. None of the above
19. A farmer began the year with an outstanding balance of $50,000 on his operating loan and
accrued interest of $3,000 on the loan. The loan carries an interest rate of 7% on
outstanding principal. Six months later he makes a $4,000 payment on the loan. After
this payment he will have an accrued interest of
A. $0.
B. $500.
C. $750.
D. $1,000.
E. None of the above
20. If the interest rate is 6%, what is the present value of a dollar to be received by a producer
two years from now?
A. $0.826
B. $0.890
C. $0.920
D. $1.166
E. None of the above
21. For tax year 2010, the social security wage base was
A. $102,000
B. $106,800
C. $108,600
D. $110,100
E. None of the above
22. For an individual under age 50, the maximum allowable IRA contribution and deduction
in 2010 was
A. $1,000
B. $2,000
C. $3,000
D. $5,000
E. None of the above
23. The present value formula for estimating land prices (PV = annual net returns ÷ discount
rate) assumes
A. future prices and yields can be estimated accurately.
B. the discount rate is appropriate.
C. income will continue to infinity.
D. net income will not trend up or down.
E. All of the above
24. The type of life insurance which provides protection for a limited time and is usually
cheaper per dollar of protection is called
A. whole life.
B. term.
C. endowment.
D. new life.
E. universal life.
25. The net business profit 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
26. The turnover ratio is calculated by dividing __________ by average total assets.
A. total sales
B. beginning inventory
C. value of farm production
D. net farm income
E. None of the above
27. In 2010, Paul Pigraiser had a net farm income of $40,000. Paul had total business assets
of $500,000 and total liabilities of $250,000. Paul paid $25,000 in interest. Return on
equity for 2010 would be
A. 10%
B. 12%
C. 16%
D. 22%
E. None of the above
28. A farmer is "liquid" if
A. he has sufficient current assets to cover current debts.
B. he has sufficient equity to cover current debts.
C. he has sufficient assets to cover all debts.
D. he can pay all debts with all equity.
E. None of the above
29. Increasing leverage during a period when a farm's percent return to total capital is less
than the interest rate will mean
A. higher returns to equity.
B. lower returns to equity.
C. lower risk.
D. lower gross income.
E. None of the above
30. A constant payment loan with payments consisting of principal and interest is called
A. an amortized loan.
B. a complementary loan.
C. a discounted loan.
D. a fixed rate loan.
E. a capital loan.
31. 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
E. None of the above
32. If the price of a commodity increases by 5% and the quantity purchased decreases by
10%, then the demand for this commodity is
A. upward sloping.
B. inelastic.
C. elastic.
D. unitary.
E. unstable.
33. Changes in price within a year which tend to follow the same pattern over time are called
A. price cycle.
B. price seasonality.
C. price volatility.
D. price discrimination.
E. None of the above
34. A marketing function which tends to regulate the supply of a product and provide a stable
market price is
A. transporting.
B. processing.
C. grading.
D. storing.
E. None of the above
35. Which one of the following would cause an increase in the price of an agricultural
commodity?
A. An increase in supply and a decrease in demand
B. A decrease in supply with no change in demand
C. A decrease in demand with no change in supply
D. All of the above would cause price to increase
E. None of the above
36. If the price of a commodity is too high, the supply will be greater than the demand
resulting in a
A. surplus.
B. boycott.
C. monopoly.
D. shortage.
E. None of the above
37. A trader with a short position in the futures market
A. profits when prices go down; loses when prices go up.
B. profits when prices go neither up nor down.
C. profits when prices go up; loses when prices go down.
D. cannot lose money.
E. None of the above
38. The main reason for hedging is
A. to make more profit.
B. to insure against a production loss.
C. to reduce the price risk associated with producing or storing a cash commodity.
D. to take an opposite position from the speculator.
E. None of the above
39. 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
40. If a farmer purchased land for $160,000, has a loan of $100,000 remaining on the land,
and the market value of the land is $200,000, the book value of the land on the balance
sheet will be
A. $40,000.
B. $60,000.
C. $100,000.
D. $160,000 less any accumulated depreciation.
E. None of the above
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2011 DISTRICT 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.
PROBLEM I - Market Value Balance Sheet
Using the information below, complete the net worth statement for January 1, 2011:
Land . . . . . . . . . . . . . . . . . . . . . . . . $305,000
Accounts receivable. . . . . . . . . . . . . . . . . 1,800
Accounts payable . . . . . . . . . . . . . . . . . . 6,500
Machinery and equipment. . . . . . . . . . . . . . . 61,000
Cows . . . . . . . . . . . . . . . . . . . . . . . . 16,000
Calves . . . . . . . . . . . . . . . . . . . . . . . 3,600
Sows and boars . . . . . . . . . . . . . . . . . . . 15,000
Market hogs . . . . . . . . . . . . . . . . . . . . 50,000
Checking and savings . . . . . . . . . . . . . . . . 11,225
Wheat. . . . . . . . . . . . . . . . . . . . . . . . 4,800
Hog buildings . . . . . . . . . . . . . . . . . . . 47,000
Feed and hay . . . . . . . . . . . . . . . . . . . . 8,500
Accrued interest owed. . . . . . . . . . . . . . . . 14,900
Accrued taxes owed . . . . . . . . . . . . . . . . . 15,100
House. . . . . . . . . . . . . . . . . . . . . . . . 59,000
30-year land loan balance is $198,000.
$9,000 plus interest is due February 1 of each year.
10-year hog building loan balance is $44,000.
$11,000 plus interest is due August 31 of each year.
5-year tractor loan balance is $38,216.
$9,554 plus interest is due each February 1.
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, 2011, was:
A. $78,125
B. $79,925
C. $94,925
D. $110,925
E. None of the above
2. The total value of non-current assets was:
A. $472,000
B. $488,000
C. $503,000
D. $504,800
E. None of the above
3. The total value of current liabilities was:
A. $36,500
B. $46,054
C. $47,500
D. $66,054
E. None of the above
4. The total value of non-current liabilities was:
A. $250,662
B. $261,662
C. $262,216
D. $280,216
E. None of the above
5. The net worth was:
A. $191,984
B. $252,338
C. $503,000
D. $582,925
E. None of the above
6. The working capital was:
A. $13,871
B. $79,925
C. $250,332
D. $544,209
E. None of the above
7. The debt to asset ratio was:
A. 0.60
B. 0.54
C. 0.50
D. 0.46
E. None of the above
PROBLEM II -- Enterprise Budget
Use the following alfalfa budget to answer Questions 8 through 16.
ALFALFA HAY, irrigated, circular sprinkler, all equipment owned, conventional bale
__________________________________________________________________________________
Operating Inputs Units Price Qty. Value Your Value
Establishment, prorate Ac 150.000 .200 $30.00 __________
Insecticide Ac 13.500 1.660 22.41 __________
Phosphorus (P205) Lbs .400 100.000 40.00 __________
Potash (K20) Lbs .225 100.000 22.50 __________
Baling wire Bale .130 180.000 23.40 __________
Annual operating capital $ .080 11.054 .88 __________
Machinery labor Hr 11.000 3.215 35.36 __________
Irrigation labor Hr 11.000 1.775 19.53 __________
Mach. fuel, lube, repairs $ 39.56 __________
Irrig. fuel, lube, repairs $ 131.67 __________
Total operating costs $365.31 __________
Fixed costs
Machinery: Amount Value
Interest at 8.0% 346.90 27.75 __________
Depr., taxes, insurance 41.61 __________
Irrigation equipment:
Interest at 8.0% 485.34 38.83 __________
Depr., taxes, insurance 42.90 __________
Total fixed costs 151.09 __________
Production Units Price Quantity Value
Alfalfa hay Tons 120.00 6.00 720.00 __________
Total receipts 720.00
Returns above total operating costs 354.69 __________
Returns above all specified costs 203.60 __________
__________________________________________________________________________________
8. Total operating cost per acre is
A. $131.67
B. $203.60
C. $354.69
D. $365.31
E. None of the above
9. The return above total operating cost per acre is
A. $131.67
B. $203.60
C. $354.69
D. $365.31
E. None of the above
10. How many hours of labor are budgeted per acre?
A. 4.99
B. 11.00
C. 22.00
D. 50.89
E. None of the above
11. What is the average weight of the hay bales?
A. 50.0 pounds
B. 66.7 pounds
C. 75.0 pounds
D. 82.5 pounds
E. None of the above
12. What is the total budgeted interest cost per acre?
A. $37.03
B. $67.46
C. $88.84
D. $90.02
E. None of the above
13. How many tons of hay are produced in a 40-acre field?
A. 40
B. 80
C. 240
D. 520
E. None of the above
14. What was the cost per acre to establish the stand of alfalfa?
A. $30.00
B. $150.00
C. $287.90
D. Not enough information given
E. None of the above
Some adjustments need to be made to the budget. Potash costs are too low and there is no charge
for land use.
15. If potash costs 45 cents per pound, how much will per-acre costs increase? (Ignore
changes in operating capital.)
A. $14.00
B. $22.50
C. $32.17
D. $45.00
E. None of the above
16. If the land is rented for $80 per acre and potash is 45 cents per pound, what hay price will
cause expected per acre return over all budgeted costs to equal zero? (Ignore changes in
capital costs.)
A. $103.15 per ton
B. $123.64 per ton
C. $129.81 per ton
D. $136.85 per ton
E. None of the above
PROBLEM III -- Income Tax Management
In December 2009, cash basis farmer G. T. Leavenworth estimates his adjusted gross income for
the year at $50,000. This will give him marginal tax rates of 28% on federal income tax, 15.3%
on Social Security and Medicare, and 6% on the Missouri income tax. He will not itemize on his
federal or state tax returns.
17. He has some wheat stored which he is considering selling. If he sells in December, it
will increase his 2009 net farm income by $2,000. How much will this add to his Social
Security tax obligation? (Hint: Only 92.35% of self-employment income is subject to
the Social Security and Medicare tax.)
A. $0, he has reached the maximum
B. $282.59
C. $306.00
D. $1,847.00
E. None of the above
18. If he sells the wheat, how much will it add to his federal income tax obligation. (Hint:
50% of his Social Security taxes are deductible on the federal income tax form.)
A. $481.01
B. $517.16
C. $520.44
D. $560.00
E. None of the above
19. If he sells the wheat, how much will it add to his Missouri income tax obligation? (Hint:
Federal income taxes are a deduction on the Missouri income tax form.)
A. $88.77
B. $103.04
C. $120.00
D. $136.44
E. None of the abovee
20. What is G. T.'s marginal tax rate? (Hint: How much of the $2,000 in wheat went to pay taxes?)
A. 38%
B. 40%
C. 43%
D. 45%
E. None of the above
21. The primary advantage of postponing the wheat sale from December to January is
A. it will then be treated as capital gains.
B. it will reduce G. T.'s tax basis in the wheat.
C. it will allow him to claim depreciation.
D. it will postpone the due date of taxes by 365 days.
E. None of the above
22. During the year, a farmer pays $1,850 principal and $500 interest on a tractor loan. His
annual depreciation is $2,400. His deductible operating expenses (fuel, oil, repairs, etc.)
associated with operating the tractor totaled $500. His marginal tax rate is 25%. What
is his after-tax cash cost of using the tractor for the year?
A. $850
B. $2,000
C. $2,100
D. $2,850
E. None of the above
PROBLEM IV -- Supply and Demand
(See graph in separate file)
The above graph represents the supply of wheat (S), the demand for wheat in the U.S. (DUS), the
demand for wheat for export (DF), and the total demand for wheat (DT).
23. What is the market equilibrium price of wheat 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 wheat will be used in the U.S.?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
25. At the market equilibrium price, how much wheat will be exported?
A. Q1
B. Q2
C. Q3
D. Q4
E. Q5
26. Without foreign demand, the equilibrium price of wheat would be
A. P1
B. P2
C. P3
D. P4
E. P5
For Questions 27 and 28, include foreign demand and assume higher yields cause the supply to
increase from S to S1
27. The increased supply of wheat should cause wheat demand to
A. shift to the left and up.
B. shift to the right and down.
C. not change.
D. None of the above
28. Higher wheat yields would cause
A. exports of wheat to go up.
B. the equilibrium price of wheat to go down.
C. Both of the above
D. the foreign demand for wheat to shift left.
E. None of the above
PROBLEM V - Marketing
In January, a farmer has 7,000 bushels of corn in the bin. He sells the corn on April 25. Ignore
commissions, storage cost, and interest.
January 15 quotes: April 25 quotes:
May futures price = $6.46 May futures price = $6.55
Expected basis = $0.10 under the board Basis = $0.05 under the board
Strike -- May Premiums -- -- May Premiums --
price Call Put Call Put
$6.20 $0.43 $0.07 $0.33 $0.01
$6.30 $0.33 $0.14 $0.24 $0.03
$6.40 $0.24 $0.22 $0.16 $0.05
$6.50 $0.16 $0.31 $0.09 $0.11
$6.60 $0.09 $0.41 $0.04 $0.20
29. What is the cash price of corn on April 25?
A. $6.35
B. $6.40
C. $6.45
D. $6.50
E. None of the above
30. If the farmer sold one 5,000-bushel futures contract on January 15 and bought back the
contract on April 25, what would be the realized price per bushel (cash + net on futures)
for his corn?
A. $6.32
B. $6.37
C. $6.41
D. $6.44
E. None of the above
31. If the farmer sold two 5,000-bushel futures contracts on January 15 and bought both
back on April 25, what would be the realized price per bushel (cash + net on futures) for
his corn?
A. $6.32
B. $6.37
C. $6.41
D. $6.44
E. None of the above
32. If the farmer bought one 5,000-bushel $6.30 Put on January 15 and sold the Put on April
25, what would be the realized price per bushel (cash + net on options) for his corn?
A. $6.39
B. $6.42
C. $6.45
D. $6.50
E. None of the above
33. If the farmer bought two 5,000-bushel $6.30 Puts on January 15, and sold the Puts April
25, what would be the realized price per bushel (cash + net on options) for his corn?
A. $6.28
B. $6.34
C. $6.39
D. $6.43
E. None of the above
34. If the farmer sold his corn on January 15 for $6.32 per bushel and bought one 5,000-
bushel $6.50 May call, then sold the Call on April 25, his realized price per bushel (cash
+ net on options) would be:
A. $6.21
B. $6.27
C. $6.41
D. $6.44
E. None of the above
PROBLEM VI - Inflation
The table below shows average nominal commodity prices and the Consumer Price Index (1967=100)
for various years. Use this data to answer questions 35-40.
Year CPI Corn Hogs Steers Oil
$/bu. $/cwt. $/cwt. $/barrel
2010 653.2 3.55 49.73 95.03 70.80
2005 585.0 2.06 46.62 87.28 50.04
2000 515.8 1.82 42.41 69.65 26.73
1995 456.5 2.26 39.99 66.25 16.75
1990 391.4 2.36 54.55 77.40 20.03
1985 322.2 2.62 44.50 58.37 24.09
1980 246.8 2.52 40.04 67.64 34.42
1975 161.2 3.02 48.32 41.89 7.67
1970 116.3 1.16 21.95 29.36 3.18
1967 100.0 1.24 19.37 25.29
1965 94.5 1.17 21.30 24.99
1960 88.7 1.04 15.96 25.09
1955 80.2 1.43 15.19 22.16
1950 71.1 1.24 18.52 28.88
35. What price would a bushel of corn have needed to be in 2010 to have the same inflation
adjusted price as in 1967?
A. $8.10
B. $6.40
C. $5.16
D. $4.81
E. None of the above
36. Which of these four commodities increased faster than inflation between 1990 and 2010?
A. Corn
B. Hogs
C. Steers
D. Oil
E. None of the above
37. Which of these four commodities did the poorest job of keeping up with inflation between 2000
and 2010?
A. Corn
B. Hogs
C. Steers
D. Oil
E. None of the above
38. Adjusted for inflation, corn prices were lowest in
A. 1960
B. 1995
C. 2000
D. 2005
E. None of the above
39. Adjusted for inflation, steer prices were highest in
A. 1950
B. 1975
C. 2005
D. 2010
E. None of the above
40. Which decade had the most inflation?
A. 1960s
B. 1970s
C. 1980s
D. 1990s
E. None of the above
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KEY
2011 DISTRICT FFA FARM MANAGEMENT CONTEST
Multiple Choice
1. A 11. A 21. B 31. B
2. A 12. C 22. D 32. C
3. B 13. C 23. E 33. B
4. A 14. D 24. B 34. D
5. C 15. D 25. C 35. B
6. B 16. C 26. C 36. A
7. D 17. A 27. C 37. A
8. C 18. B 28. A 38. C
9. A 19. C 29. B 39. A
10. A 20. B 30. A 40. D
Problems
1. B 11. B 21. D 31. B
2. C 12. B 22. B 32. B
3. D 13. C 23. D 33. B
4. A 14. B 24. B 34. B
5. E 15. B 25. A 35. A
6. A 16. A 26. B 36. D
7. B 17. B 27. C 37. B
8. D 18. C 28. C 38. C
9. C 19. A 29. D 39. A
10. A 20. D 30. D 40. B
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