Multiple Choice
Identify the choice that
best completes the statement or answers the question.
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1.
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Mike Krushel wants to increase
the size of his Central Ohio farming operation. He decides that the only way to do this is to borrow
$120,000 from Huntington Bank at a simple interest rate. Currently the interest rate is 9% and is
expected to increase 1% next year. Therefore, he is trying to see how much money he would save in
interest if he were to borrow now as to opposed to waiting a year. He intends to borrow the money for
ten years. How much would Mike save by borrowing now rather than waiting a full
year?
a. | $21,000 | b. | $2,100 | c. | $12,000 | d. | $1,200 |
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2.
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Justin Zwick bought a new
tractor for $65,000. He decides that he will use the tractor for ten years at which time he will sell
it at a salvage value of $20,000. What will be the rate of depreciation usin the straight-line
method?
a. | $5,000/year | b. | $6,500/year | c. | $2,000/year | d. | $4,500/year |
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3.
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Steve Brown’s Ohio
Catfish operation is valued at $120,000. Steve has a debt of $70,000 for the intial setup and owes an
additional $10,000 for fish, feed and equipment. What is the ratio of assets to
liabilities?
a. | 3:2 | b. | 3:1 | c. | 2:2 | d. | 2:1 | e. | 7:1 |
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4.
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When Dan Zimmerman of Oxford,
Ohio sold his crossbred show steer he recieved $1,075. He figured his total expenses to be $925. The
percentage net return realized was_______
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5.
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What is the total building rent
and equipment rent?
a. | $7,450 | c. | $24,150 | e. | none are correct | b. | $9,150 | d. | $52,150 |
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6.
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What is the net income for this
business?
a. | $47,850 | c. | $52,200 | e. | none are correct | b. | $55,850 | d. | $60,850 |
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7.
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What is the gross cash income
for this business?
a. | $100,000 | c. | $88,000 | e. | none are correct | b. | $92,000 | d. | $72,500 |
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8.
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If the owner worked in this
business for 35 hours per week for 75 weeks, what is the return per hour for his
work?
a. | $5.00 | c. | $21.28 | e. | none are correct | b. | $10.32 | d. | $18.23 |
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9.
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John Miley has assets with a
total value of________.
a. | $88,500 | c. | $203,500 | e. | $546,500 | b. | $103,500 | d. | $546,500 |
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10.
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Mr. Miley has a net worth
of_______.
a. | $102,500 | c. | $118,500 | e. | none are correct | b. | $15,500 | d. | $235,500 |
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11.
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What is John Miley’s
producer’s equity ratio?
(also known as Debt-to-net Worth of total liabilities divided by
net worth)
a. | 52 | c. | 2.85 | e. | 63.50 | b. | 1.41 | d. | 21.48 |
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12.
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J.D Ogle spent 10 hours each
week caring for “Big Gem’s” cattle operation in 2003. His dad Jim Ogle, has offered
him a token wage of $5.00/hour to take care of the cattle operation so Jim can take care of other
obligations. What will be the total wages for J.D Ogle from his dad in 2003 for all 52 weeks or
annual charge for his labor?
a. | $2,600 | c. | $1,300 | e. | none are correct | b. | $2,400 | d. | $520 |
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13.
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When a farmer increases his
investment in land, buildings, and equipment without increasing the total units of production, the
cost per unit of production:
a. | decreases | c. | varies with the operator | b. | increases | d. | remains the same |
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14.
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Purchase of a call option on
corn means:
a. | the buyer is required to sell a corn
futures contract at a set price | b. | the buyer may, but is not required to sell a corn futures contract at a set
price | c. | the buyer may, but is not required to buy a corn futures contract at a set
price | d. | the buyer is required to buy a corn futures contract at a set
price |
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15.
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Corn yields 90 bushels per acre
and has a production cost of $140 per acre. Current market prices are $2.50 per bushel for corn and
$6.00 per bushel for soybeans. Soybeans can be raised at a production cost fo $110 per acre. At what
breakeven yield per acre would soybean generate the same net return per acre as
corn?
a. | 25
bushels | b. | 32 1/2
bushels | c. | 37 1/2
bushels | d. | 39
bushels |
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16.
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The return an input would have
earned in its best alternative use is called its:
a. | fixed
cost | b. | opportunity
cost | c. | gross
income | d. | total
revenue |
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17.
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It is profitable for a farmer
to borrow money to expand his farm business when the borrowed money
a. | will increase volume of
business | c. | can be secured at
a low interest rate | b. | can improve the level of production | d. | returns more than the cost |
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18.
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A dollar received tomorrow can
be worth less than a dollar today, because of:
a. | inflation | c. | the time value of money | b. | capital budgeting | d. | taxation |
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19.
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What is the total value of the
current assets?
a. | $47,600 | b. | $49,600 | c. | $52,600 | d. | $54,400 | e. | $77,500 |
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20.
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What is the total value of the
fixed assets for Carol’s operation?
a. | $45,000 | b. | $19,000 | c. | $77,500 | d. | $92,000 | e. | $126,600 |
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21.
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What is the total value of the
intermediate assets?
a. | $93,000 | c. | $145,600 | e. | none are correct | b. | $98,000 | d. | $126,600 |
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22.
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Carol’s total assets
amount to:
a. | $164,600 | b. | $145,600 | c. | $159,600 | d. | $132,100 |
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23.
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What is the total of
Carol’s liabilities?
a. | $71,400 | b. | $64,600 | c. | $69,600 | d. | $66,400 |
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