Ag Business test 2
Break-even point is defined as
The level of business operations at which revenues and total costs are equal
______________ are a stream of incomes and/or costs that are equal in amounts for each of the number of period evaluated
Annuities
XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In recession, the earnings per share (EPS) of XYZ Chemical, Inc. would be:
5.20
Ratios are valuable to managers because they:
a and b only
Liquidity ratios measure a firm's ability to:
meet its day-to-day cash needs
The biginning inventory for AgBiz for the year 2012 was $151000, the ending inventory was $127000 and the cost of goods sold was $1129000. What was the inventory purchase in this period?
$1,105,000
The market price of the outstanding shares of XYZ Chemical, Inc. based on the current market value of the company, is:
100
Vivian had a lifelong dream of opening a bookstore, but with big box national chains like Borders and Internet options like Amazon, she decided to focus on a niche market. She operates vending machines selling books dealing with planting and taking care of ornamental flowers at two airports in the Washington, DC area. This is not quite consistent with her original vision, but it satisfies her fixation on selling books. Now she has an opportunity to set up a third machine at the nearby Baltimore airport. She will lease the machine for $2,000 per year and pay rent (including all related expenses, such as electricity) of $2,000 per year to the Airport Commission. She figures her labor in servicing the machine will be about $150 per month. She buys the books for $2.00 each and sells them for $4.00 each. She is exempt from sales tax. Based on experience at other airports, Vivian projects that she will sell about 700 books per month. What will her profit be (if any) in the first year?
$11000
Vivian had a lifelong dream of opening a bookstore, but with big box national chains like Borders and Internet options like Amazon, she decided to focus on a niche market. She operates vending machines selling books dealing with planting and taking care of ornamental flowers at two airports in the Washington, DC area. This is not quite consistent with her original vision, but it satisfies her fixation on selling books. Now she has an opportunity to set up a third machine at the nearby Baltimore airport. She will lease the machine for $2,000 per year and pay rent (including all related expenses, such as electricity) of $2,000 per year to the Airport Commission. She figures her labor in servicing the machine will be about $150 per month. She buys the books for $2.00 each and sells them for $4.00 each. She is exempt from sales tax. What is Vivian's break-even revenue?
$11600
You want to have $30000 saved 5 years from now to buy a farm equipment. How much less do you have to deposit today to reach this goal if you can earn 3.5 percent rather than 2.5 percent on your savings? Today's deposit is the only deposit you will make to this savings account.
$1256.43
AgBiz Inc. reported $205 million as current assets in its Balance Sheet as of December 2012. In the same period the current liabilities were $41 million. The net working capital of AgBiz Inc. was
$164 million
Vivian had a lifelong dream of opening a bookstore, but with big box national chains like Borders and Internet options like Amazon, she decided to focus on a niche market. She operates vending machines selling books dealing with planting and taking care of ornamental flowers at two airports in the Washington, DC area. This is not quite consistent with her original vision, but it satisfies her fixation on selling books. Now she has an opportunity to set up a third machine at the nearby Baltimore airport. She will lease the machine for $2,000 per year and pay rent (including all related expenses, such as electricity) of $2,000 per year to the Airport Commission. She figures her labor in servicing the machine will be about $150 per month. She buys the books for $2.00 each and sells them for $4.00 each. She is exempt from sales tax. What is the contribution margin per unit (per book)? That is, for each book sold, what contribution is made to cover the fixed costs and profits of Vivian's business?
$2.00 per book
XYZ Chemical, Inc. has no debt outstanding and a total market value of $300000. Earnings before interest and taxes (EBIT) are projected to be $60000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3000 shares outstanding. The tax rate is 35% In recession, the EBIT of XYZ Chemical, Inc. will decrease to
$24000
The Bluerock Group, which is a major blueberry producer in Southwest Missouri has invested $8,000 in a high-tech project lasting three years to monitor the blueberry harvest. Depreciation is $4,000, $2,500, and $1,500 in years 1, 2, and 3, respectively. The project is expected to generate an additional pre-tax income of $2,000 each year. The pre-tax income already includes the depreciation expense. If the tax rate is 25%, What is the net present value of the project with a market interest rate of 6% and a risk premium of 3%?
$2729
You have decided to make $4000 contribution to 401K. The rate of return (r) on the account is 11%. Assume that no additional contribution will be made to your account, what will be the difference in amount if you start contribution to your account now and retire in 45 years compared to if you wait another 10 years before contributing the same amount to your account?
$283822
Travis invested $8250 in an account that pays 4% simple interest. How much more could he have earned over a 7-year period if the interest had compounded annually?
$296.44
You have just received notification that you have won the $1.4 million first prize in the Centennial Lottery. However, the prize will be awarded on your 100th birthday, 78 years from now. The appropriate discount rate is 8 percent. What is the present value of your winnings?
$3460
XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In expansion, the EBIT of XYZ Chemical, Inc. will increase to:
$78,000
A firm has $520 in inventory, $1860 in fixed assets, $190 in accounts receivables, $210 in accounts payable, and $70 in cash. What is amount of current assets?
$780
XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. What is the Debt-to-Equity Ratio of XYZ Chemical, Inc. after the proposed change in the capital structure?
.50
The Debt-toEquity Ratio of XYZ Chemical, Inc. before changing the capital structure is:
0
The Bluerock Group, which is a major blueberry producer in Southwest Missouri has invested $8,000 in a high-tech project lasting three years to monitor the blueberry harvest. Depreciation is $4,000, $2,500, and $1,500 in years 1, 2, and 3, respectively. The project is expected to generate an additional pre-tax income of $2,000 each year. The pre-tax income already includes the depreciation expense. If the tax rate is 25%, What is the payback period of the project (select the closest answer):
1 year and 7.5 months
Russell's Deli has cash of $136, accounts receivables of $95, accounts payable of $210, and inventory of $409. What is the value of the quick ratio?
1.10
The Bluerock Group, which is a major blueberry producer in Southwest Missouri has invested $8,000 in a high-tech project lasting three years to monitor the blueberry harvest. Depreciation is $4,000, $2,500, and $1,500 in years 1, 2, and 3, respectively. The project is expected to generate an additional pre-tax income of $2,000 each year. The pre-tax income already includes the depreciation expense. If the tax rate is 25%, The profitability index of the project is:
1.34
Jupiter Company has provided the following information: Description 2003 Net Income before income tax 100,000 Income Tax Expense 30,000 Interest 144,000 Average total Assets 2,300,000 Average total stockholders' equity 1,100,000 Number of time interest earned by the company for 2003 is
1.69 times
XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. By issuing debt, XYZ Chemical, Inc. can buy back how many shares?
1000
Al's Sport Store has sales of $897400, cost of goods sold of $628300, inventory of $208400, and accounts receivables of $74100. What is average holding period in days (rounded number)? Assume 365 days as working days
122 days
XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In a normal economy, the earnings per share (EPS) of XYZ Chemical, Inc. is:
13.00
XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In expansion, the earnings per share (EPS) of XYZ Chemical, Inc. would be:
16.90
The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. There are two options, and the price to the customer will be the same for each. The option is to install a salad bar stocked with vegetables, fruits, and toppings and then let the customer assemble the salad. The salad bar will have to be leased and a part-time employee hired. The manager estimates fixed costs at $12,000 and variable costs totaling $1.50 per salad. The buy option is to have pre-assembled salad available for sale. They will be purchased from a local supplier at $2.00 per salad. Offering pre-assembled salads will require installation and operation of additional refrigeration, with an annual fixed cost of $2,400. The manager expects to sell 25,000 salads per year. What is the break-even quantity?
19,200
Vivian had a lifelong dream of opening a bookstore, but with big box national chains like Borders and Internet options like Amazon, she decided to focus on a niche market. She operates vending machines selling books dealing with planting and taking care of ornamental flowers at two airports in the Washington, DC area. This is not quite consistent with her original vision, but it satisfies her fixation on selling books. Now she has an opportunity to set up a third machine at the nearby Baltimore airport. She will lease the machine for $2,000 per year and pay rent (including all related expenses, such as electricity) of $2,000 per year to the Airport Commission. She figures her labor in servicing the machine will be about $150 per month. She buys the books for $2.00 each and sells them for $4.00 each. She is exempt from sales tax. What is Vivian's break-even quantity (BEQ) of books after a year of operation?
2,900 books
Oovda Winery in Springfield is contemplating adding a new red wine line for low price market in Springfield area. It will require leasing a new equipment for a monthly payment of $6000. Variable cost of the wine per bottle would be $2, and wine can be sold in the market at $7 per bottle. How many bottle must be sold to realize a profit of $4,000 per month?
2000 bottles
The Bluerock Group, which is a major blueberry producer in Southwest Missouri has invested $8,000 in a high-tech project lasting three years to monitor the blueberry harvest. Depreciation is $4,000, $2,500, and $1,500 in years 1, 2, and 3, respectively. The project is expected to generate an additional pre-tax income of $2,000 each year. The pre-tax income already includes the depreciation expense. If the tax rate is 25%, What is the IRR of the project? (approximately)
30%
The following data were extracted from the income statement of Sierra Instruments Inc. Description Current Year Sales 3,600,000 Beginning Inventory 310,000 Cost of goods sold 2,010,000 Ending Inventory 360,000 The number of days the inventory is held. Assume 360 days.
65 days
Jupiter Company has provided the following information: Description 2003 Net Income before income tax 100,000 Income Tax Expense 30,000 Interest 144,000 Average total Assets 2,300,000 Average total stockholders' equity 1,100,000 Return on Assets ratio of the company for 2003 is
7.4%
Oovda Winery in Springfield is contemplating adding a new red wine line for low price market in Springfield area. It will require leasing a new equipment for a monthly payment of $6000. Variable cost of the wine per bottle would be $2, and wine can be sold in the market at $7 per bottle. If 2,000 bottles can be sold, and profit target is $5000, what price should be charged per bottle of new red wine?
7.50
Ten years ago, Jackson Supply set aside $130000 in case of financial emergency. Today, that account has increased in value to $330,592. What rate of interest is the firm earning on this money?
9.78%
The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. There are two options, and the price to the customer will be the same for each. The option is to install a salad bar stocked with vegetables, fruits, and toppings and then let the customer assemble the salad. The salad bar will have to be leased and a part-time employee hired. The manager estimates fixed costs at $12,000 and variable costs totaling $1.50 per salad. The buy option is to have pre-assembled salad available for sale. They will be purchased from a local supplier at $2.00 per salad. Offering pre-assembled salads will require installation and operation of additional refrigeration, with an annual fixed cost of $2,400. The manager expects to sell 25,000 salads per year. If the projected sales is only 15,000 salads, s/he should decide to:
Buy the salads
Christine invested $3000 five years ago and earns 2% interest on her investment. By leaving her interest earnings in her account, she increases the amount of interest she earns each year. The way she is handling her interest income is referred to as which one of the following?
Compounding
Which of the following statements describes variable costs?
Costs that vary in total direct proportion to changes in the level of activity
XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In a recession, what is the earnings per share (EPS) of XYZ Chemical, Inc., after the proposed change in the capital structure?
Decreases to $4.55 per share after the proposed change in capital structure
Contribution margin represents contribution to
Fixed costs and profits
XYZ Chemical, Inc. has no debt outstanding and a total market value of $300,000. Earnings before interest and taxes (EBIT) are projected to be $60,000 if economic conditions are normal. If there is a strong expansion in the economy, then EBIT will be 30% higher. If there is a recession, then EBIT will be 60% lower. XYZ Chemical, Inc. is considering a $100,000 debt issue with a 10% interest rate. The proceeds will be used to repurchase shares of stock. There are currently 3,000 shares outstanding. The tax rate is 35%. In a normal economy, what is the earnings per share (EPS) of XYZ Chemical, Inc., after the proposed change in the capital structure?
Increases to $16.25 per share after the proposed change in capital structure
A decrease in the firm's receivable turnover ratio means that ______
It is collecting credit sales more slowly than before
The manager of a fast-food restaurant featuring hamburgers is adding salads to the menu. There are two options, and the price to the customer will be the same for each. The option is to install a salad bar stocked with vegetables, fruits, and toppings and then let the customer assemble the salad. The salad bar will have to be leased and a part-time employee hired. The manager estimates fixed costs at $12,000 and variable costs totaling $1.50 per salad. The buy option is to have pre-assembled salad available for sale. They will be purchased from a local supplier at $2.00 per salad. Offering pre-assembled salads will require installation and operation of additional refrigeration, with an annual fixed cost of $2,400. The manager expects to sell 25,000 salads per year. Given that the manager expects to sell 25,000 salads, s/he should decide to:
Make the salads
The inventory is purchased for $1 million and paid for in cash for the same amount. Therefore, the Net Working Capital
No change in the net working capital
You are comparing two investment options that each pay 5 percent interest, compounded annually. Both options will provide you with $12,000 of income. Option A pays three annual payments starting with $2,000 the first year followed by two annual payments of $5,000 each. Option B pays three annual payments of $4,000 each. Which one of the following statements is correct given these two investment options?
Option B has a higher present value at time zero than does option A
Factors affecting the net cost of borrowed capital are the following except
The number of employees in the firm
Oovda Winery in Springfield is contemplating adding a new red wine line for low price market in Springfield area. It will require leasing a new equipment for a monthly payment of $6000. Variable cost of the wine per bottle would be $2, and wine can be sold in the market at $7 per bottle. What would be the profit or loss if 1,000 bottles are made and sold in a month?
Will lose $1000
The following are the sources of equity finance for an agriculture company, except
municipal bonds
