Problem Set 2

Problem Set 2 - AAE 320 Farming Systems Management Problem...

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1 AAE 320 Farming Systems Management Problem Set #2 Due March 7, 2008 1) Your cousin owns a store in a small town in Wisconsin. Last year sales revenue for her store was $750,000. Her variable operating costs are $630,000 per year. Annual interest expenses on the bank loan are $50,000. Inventory and business equipment she owns have a current market value of $750,000. She owes a local bank $600,000 in a business loan. A store in a local mall offers her a job paying $50,000 per year to manage their store. If she liquidated her inventory and equipment and closed her store, she could invest the remaining money to earn 10% annually. a) Compute her accounting profit. b) Compute her economic profit. c) She asks you for advice on whether to close the store and take the manager job, or to stay and run her own store. Which do you recommend and why? 2) You are deciding on how many steers to put on your 150 ac pasture. You will to start them in early-to-mid May and sell them in early-to-mid October (165 days).
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Problem Set 2 - AAE 320 Farming Systems Management Problem...

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