Question

$ 145,600 Use the following information for Longliew Farms to answer problem 5. Crops & feed revenue Livestock and livestock product revenue Total nonfarm income Total farm operating expenses Depreciation expense Income tax expense Interest expense Withdrawals for family living Principal payments on unpaid operating debts Principal payments on current portions of debt & leases 215,300 12,000 252,629 50,526 10,827 64,962 28,000 29,890 a) Calculate capital replacement and term debt repayment capacity for LongView Farms. b) Calculate capital replacement and term debt repayment margin (CRDRM) for Long View Farms. c) Estimate the percent that crop revenue and livestock revenue can decline and still maintain positive CRDRM. d) Estimate the percent operating expenses and interest expenses can increase and still maintain positive CRDRM.

Answer 1

Answer -

Calculation of Net Farm Income from Operations as -

Gross Farm Revenues - Crop and feed Revenues Livestock and Livestock Product Revenues	$145,600 $ 215,300	$360,900
Less : - Total farm operating expenses		($252,629)
EBITDA		$108,271
Less : - Interest Expense		($64,962)
Net Farm Revenue from Oprations		$43309

Calculation of Capital Debt Repayment Capacity & Margin and Replacement Margin as -

Net Farm Revenue from Oprations	1	$43309
Total Non-farm Income	2	$12000
Interest Expense on Term Debt	3	0
Depreciation Expense	4	$50526
Family Expense	5	$28000
Income tax Expense - self	6	$10827
Capital Debt Replacement Capacity [(1+2+3+4)-(5+6)]	7	$67008
Principle payment of Debt & Leases	8	$29890
Unpaid Oprating Debts	9	0
Capital Debt Repament Margin [7-(3+8+9)]	10	$38000
Cash Used for Capital Replacement	11	0
Replacement Margin (10-11)	12	$38000
Term Debt & Capital Lease Coverage Ratio [7/(3+8+9)	13	224.18%
Replacement Margine Coverage Ratio [7/(3+8+9+11)	14	224.18%