IV. Agricultural Economics and Marketing

Question 1

1. The benefits to society regardless of who in the society receives the benefits.

A. Financial benefit
B. Economic benefit
C. Revenue
D. Sales

Answer 1

Answer: B

Question 2

2. Benefits less costs excluding depreciation.

A. Profit
B. Net benefit
C. Cash flow
D. Economic benefits

Answer 2

Answer: C

Question 3

3. Which one is a one-time expense?

A. Investment
B. Single cost
C. One-time cost
D. Operating cost

Answer 3

Answer: A

Question 4

4. Annually recurring cost.

A. Investment
B. Operating cost
C. Contingency
D. Operating capital

Answer 4

Answer: B

Question 5

5. Land is an example of

A. Investment
B. Operating cost
C. Contingency
D. Operating capital

Answer 5

Answer: A

Question 6

6. Manager’s salary is an example of

A. Investment
B. Operating cost
C. Maintenance cost
D. Operating capital

Answer 6

Answer: B

Question 7

7. The cash component of investment.

A. Cash investment
B. Operating cost
C. Contingency
D. Operating capital

Answer 7

Answer: D

Question 8

8. Contingency is normally what percentage of investment cost?

A. 5%
B. 10%
C. 15%
D. 20%

Answer 8

Answer: B

Question 9

9. The scrap value of a property?

A. Salvage value
B. Economic value
C. Book value
D. End value

Answer 9

Answer: A

Question 10

10. What is market price deducted by tax.

A. Discounted price
B. Taxed price
C. Shadow price
D. Economic price

Answer 10

Answer: C

Question 11

11. The equivalent value of a property at any given year.

A. Salvage value
B. Economic value
C. Book value
D. End value

Answer 11

Answer: C

Question 12

12. 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 12

Answer: B
Solution: Depreciation = (Php2,500,000-Php250,000)/8 years = Php 281,250/year

Question 13

13. What feasibility indicator is best for determining how fast the project recovers the investment?

A. NPV
B. IRR
C. BCR
D. Payback period

Answer 13

Answer: D

Question 14

14. 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 14

Answer: A

Question 15

15. What feasibility indicator is normally compared to bank’s interest rate?

A. NPV
B. IRR
C. BCR
D. Payback period

Answer 15

Answer: B

Question 16

16. Which among the feasibility indicators is best for determining project performance?

A. NPV
B. IRR
C. BCR
D. Payback period

Answer 16

Answer: A

Question 17

17. 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 17

Answer: D

Question 18

18. What feasibility analysis uses shadow prices?

A. Financial analysis
B. Economic analysis
C. Risk analysis
D. Sensitivity analysis

Answer 18

Answer: B

Question 19

19. What feasibility analysis uses market prices?

A. Financial analysis
B. Economic analysis
C. Risk analysis
D. Sensitivity analysis

Answer 19

Answer: A

Question 20

20. 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 20

Answer: B

Question 21

21. The normal combined discount and inflation rate of the Philippines.

A. 2-4%
B. 5-7%
C. 8-12%
D. 16-20%

Answer 21

Answer: C

Question 22

22. The discounted cash flow at project start is always equal to ____.

A. Zero
B. Net benefit
C. Net profit
D. Net cash flow

Answer 22

Answer: D

Question 23

23. The price at which there is no loss or gain.

A. Discounted price
B. Optimum price
C. Minimum price
D. Break-even price

Answer 23

Answer: D

Question 24

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 24

Answer: A (since only Farm-to-Market road project has IRR higher than discount plus inflation rate)

Question 25

2. 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 25

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

Question 26

3. 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 26

Answer: D (In econ. analysis, NPVof 0 is feasible since it has economic benefits even if it is just break-even)

Question 27

4. 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 27

Answer: B (since its IRR is higher than discount plus inflation rate)

Question 28

5. 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 28

Answer: B (if it is feasible at 12% discount rate, the more it will be feasible at 9%)