Question

1)a)The COFD = 8.5% and ROFE is 8.8%. What do we know about ROFA?

ROFA is less than 8.5%

ROFA is greater than 8.5% but less than 8.8%

ROFA is greater than 8.8%

There is insufficient information to determine a range for ROFA

b)The COFD = 8.5% and ROFA is 8.8%. What do we know about ROFE?

ROFE is less than 8.5%

ROFE is greater than 8.5% but less than 8.8%

ROFE is greater than 8.8%

There is insufficient information to determine a range for ROFE

Answer 1

ROFA = Return on farm Assets,

ROFE = Return on farm equity and

Cost of farm debt

1)a)The COFD = 8.5% and ROFE is 8.8%.

ROFA is less than or equal to ROFE.

ROFA is higher than COFD

ROFE> ROFA> COFD

Correct Answer is B ROFA is greater than 8.5% but less than 8.8%

b)The COFD = 8.5% and ROFA is 8.8%.

ROFE is higher than or equal to ROFA. Thus ROFE is greater than 8.8%

Correct Answer is C ROFE is greater than 8.8%