IV. Agricultural Economics and Marketing Flashcards
- The benefits to society regardless of who in the society receives the benefits.
A. Financial benefit
B. Economic benefit
C. Revenue
D. Sales
Answer: B
- Benefits less costs excluding depreciation.
A. Profit
B. Net benefit
C. Cash flow
D. Economic benefits
Answer: C
- Which one is a one-time expense?
A. Investment
B. Single cost
C. One-time cost
D. Operating cost
Answer: A
- Annually recurring cost.
A. Investment
B. Operating cost
C. Contingency
D. Operating capital
Answer: B
- Land is an example of
A. Investment
B. Operating cost
C. Contingency
D. Operating capital
Answer: A
- Manager’s salary is an example of
A. Investment
B. Operating cost
C. Maintenance cost
D. Operating capital
Answer: B
- The cash component of investment.
A. Cash investment
B. Operating cost
C. Contingency
D. Operating capital
Answer: D
- Contingency is normally what percentage of investment cost?
A. 5%
B. 10%
C. 15%
D. 20%
Answer: B
- The scrap value of a property?
A. Salvage value
B. Economic value
C. Book value
D. End value
Answer: A
- What is market price deducted by tax.
A. Discounted price
B. Taxed price
C. Shadow price
D. Economic price
Answer: C
- The equivalent value of a property at any given year.
A. Salvage value
B. Economic value
C. Book value
D. End value
Answer: C
- Using simplest computation method, what is the annual depreciation of a tractor purchased at Php 2,500,000 if its life span is assumed at 8 years? Salvage value is 10%.
A. Php 218,250
B. Php 281,250
C. Php 821,250
D. Php 250,281
Answer: B
Solution: Depreciation = (Php2,500,000-Php250,000)/8 years = Php 281,250/year
- What feasibility indicator is best for determining how fast the project recovers the investment?
A. NPV
B. IRR
C. BCR
D. Payback period
Answer: D
- What feasibility indicator is best for determining how much can you gain from a certain project?
A. NPV
B. IRR
C. BCR
D. Payback period
Answer: A
- What feasibility indicator is normally compared to bank’s interest rate?
A. NPV
B. IRR
C. BCR
D. Payback period
Answer: B
- Which among the feasibility indicators is best for determining project performance?
A. NPV
B. IRR
C. BCR
D. Payback period
Answer: A
- What analysis is done to determine the degree of project feasibility at various scenarios?
A. Financial analysis
B. Economic analysis
C. Risk analysis
D. Sensitivity analysis
Answer: D
- What feasibility analysis uses shadow prices?
A. Financial analysis
B. Economic analysis
C. Risk analysis
D. Sensitivity analysis
Answer: B
- What feasibility analysis uses market prices?
A. Financial analysis
B. Economic analysis
C. Risk analysis
D. Sensitivity analysis
Answer: A
- Which situation is better and attainable for a good economy?
A. High discount rate
B. Low discount rate
C. Fast discount rate
D. No discount rate
Answer: B
- The normal combined discount and inflation rate of the Philippines.
A. 2-4%
B. 5-7%
C. 8-12%
D. 16-20%
Answer: C
- The discounted cash flow at project start is always equal to ____.
A. Zero
B. Net benefit
C. Net profit
D. Net cash flow
Answer: D
- The price at which there is no loss or gain.
A. Discounted price
B. Optimum price
C. Minimum price
D. Break-even price
Answer: D
DIFFICULT QUESTIONS:
1. Using financial feasibility analysis, the Net Present Values (NPVs) of farm-to-market road, irrigation and flood
control projects are 22.5, 7.5 and -3.1 million pesos, while the Internal Rate of Returns (IRRs) are 15%, 7% and 2.1%, respectively. Annual discount plus inflation rate is 10%. Which project shall be implemented?
A. Farm-to-market road
B. Irrigation
C. Flood control
D. None
Answer: A (since only Farm-to-Market road project has IRR higher than discount plus inflation rate)
- Using straight line depreciation method, what is the book value at the end of the third year of a tractor purchased at Php 2,500,000 if its life span is assumed at 10 years? Salvage value is 10%.
A. Php1,285,000
B. Php1,582,000
C. Php1,825,000
D. Php1,852,000
Answer: C
Solution:
Depreciation = (Php2,500,000-Php250,000)/10 years = Php 225,000/year
Book value = Purchase price – total depreciations = Php2,500,000 (Php225,000/yr x3yrs) = P1,825,000
- Using economic feasibility analysis, the Net Present Values (NPVs) of small water impounding project (SWIP),
shallow tubewell, small scale irrigation project (SSIP) are -0.5, -0.9 and 0 million pesos, respectively. The proposed projects are owned by the government. Which project is economically feasible?
A. None
B. SWIP
C. Shallow tube well
D. SSIP
Answer: D (In econ. analysis, NPVof 0 is feasible since it has economic benefits even if it is just break-even)
- Microhydro, solar electrification and covered lagoon biodigester projects are evaluated for financial feasibility.
Each requires PHP 20,000,000 investment. Only one project can be funded. The financial internal rates of return are 15%, 9% and 8%, respectively. Annual discount plus inflation rate is 10%. Which project shall be implemented?
A. Covered lagoon biodigester
B. Microhydro
C. Solar electrification
D. None
Answer: B (since its IRR is higher than discount plus inflation rate)
- A banana production and export project is being evaluated for financial feasibility. At 12% annual discount rate, it
has the following feasibility indicators: net present value of 1.8 billion pesos and internal rate of return of 58%. If annual discount rate drops to 9%, will it be feasible?
A. No
B. Yes
C. Maybe
D. Insufficient data to determine
Answer: B (if it is feasible at 12% discount rate, the more it will be feasible at 9%)
