AGEC 440 TEST PAPER ANSWERS AND QUESTIONS
SET A+
✔✔E - ✔✔In accordance to the article titled " Food Strategy", food strategy involves
developing food products with the following food attributes:
A) Nutrition
B) Health
C) Convenience
D) Taste
E) C and D
✔✔interrelated formally and informally - ✔✔Agribusiness can be viewed as a number of
___________ subsectors which work together __________________ and
___________________ to produce goods and services.
✔✔consumer sovereignty - ✔✔________________________________ is the
overarching principle that impacts the agribusiness system.
✔✔perfect/complete - ✔✔Given consumer sovereignty, the efficiency of the market can
be improved (i.e. increases in consumer surplus and producer surplus), so long as the
consumer has ______________________ information.
✔✔less,WACC, tobins q, greater, 1 - ✔✔In a firm's historical performance in poor, yet
has a very positive outlook (i.e. managers expect a growing market for their products),
we would expect the firm's ROIC to be ___________________ than its
______________________. In addition, we would expect that its
_____________________ is ______________________ than
_____________________________.
✔✔does not - ✔✔In accordance to the definition of competitive advantage, technically a
monopolist (i.e. public utility company) ___________________ (does or does not) have
a competitive advantage.
✔✔ - ✔✔Given the following:
, Book value of total assets = 29.6
Invested Capital = 2634
Cost of debt = .08
Risk free rate (RFRt) = .05
Beta(Bt)= Systematic risk= .75
Market value of debt = 21.2
Market value of equity = 31.85
E(Rmt) Expected returns of a diversified portfolio = .111
Firm's operating profits= 642
Firm's market value = 22.08
Calculate:
a)Returned on Invested Capital (ROIC)
b)Economic profits
c) Tobin's q
a) .2437 b) .2153 C) .7459
✔✔ - ✔✔Annual Returns for Year 2014 (.087), 2015 (.089), 2016 (.0765), 2017 (.072),
2018 (.095)
Standard Deviation on XR (excess returns) for this event window or period (2014-2018)
=.04
a) Using the event study method, calculate the XR (excess returns) for each year.
b) Calculate the CAR
c) Was this a successful strategy? Explain.
a) 2014 (-.009) 2015 (-.007) 2016 (-.0195) 2017 (-.024) 2018 (-.001) b) -.0605 c) -
15.125 T-Value No it is less than zero.
✔✔Tobins q > 0 or 1? - ✔✔1
✔✔ROIC measures____________________ WACC measures__________________?
- ✔✔Actual performance, measure of expected returns
✔✔Food strategy CASE - ✔✔shows the embodiment of strategy, from health to
convenience
✔✔Why you need to fail CASE - ✔✔shows the benefit of leveraging SWOT, analyzing
weaknesses to turn them into strengths
✔✔ - ✔✔1. Firm survival
2. Multiple stakeholder view
3. Simple accounting measures
4. Adjusted accounting measures
5. Event study method
✔✔performance - ✔✔rests on productive, value-creating assets
SET A+
✔✔E - ✔✔In accordance to the article titled " Food Strategy", food strategy involves
developing food products with the following food attributes:
A) Nutrition
B) Health
C) Convenience
D) Taste
E) C and D
✔✔interrelated formally and informally - ✔✔Agribusiness can be viewed as a number of
___________ subsectors which work together __________________ and
___________________ to produce goods and services.
✔✔consumer sovereignty - ✔✔________________________________ is the
overarching principle that impacts the agribusiness system.
✔✔perfect/complete - ✔✔Given consumer sovereignty, the efficiency of the market can
be improved (i.e. increases in consumer surplus and producer surplus), so long as the
consumer has ______________________ information.
✔✔less,WACC, tobins q, greater, 1 - ✔✔In a firm's historical performance in poor, yet
has a very positive outlook (i.e. managers expect a growing market for their products),
we would expect the firm's ROIC to be ___________________ than its
______________________. In addition, we would expect that its
_____________________ is ______________________ than
_____________________________.
✔✔does not - ✔✔In accordance to the definition of competitive advantage, technically a
monopolist (i.e. public utility company) ___________________ (does or does not) have
a competitive advantage.
✔✔ - ✔✔Given the following:
, Book value of total assets = 29.6
Invested Capital = 2634
Cost of debt = .08
Risk free rate (RFRt) = .05
Beta(Bt)= Systematic risk= .75
Market value of debt = 21.2
Market value of equity = 31.85
E(Rmt) Expected returns of a diversified portfolio = .111
Firm's operating profits= 642
Firm's market value = 22.08
Calculate:
a)Returned on Invested Capital (ROIC)
b)Economic profits
c) Tobin's q
a) .2437 b) .2153 C) .7459
✔✔ - ✔✔Annual Returns for Year 2014 (.087), 2015 (.089), 2016 (.0765), 2017 (.072),
2018 (.095)
Standard Deviation on XR (excess returns) for this event window or period (2014-2018)
=.04
a) Using the event study method, calculate the XR (excess returns) for each year.
b) Calculate the CAR
c) Was this a successful strategy? Explain.
a) 2014 (-.009) 2015 (-.007) 2016 (-.0195) 2017 (-.024) 2018 (-.001) b) -.0605 c) -
15.125 T-Value No it is less than zero.
✔✔Tobins q > 0 or 1? - ✔✔1
✔✔ROIC measures____________________ WACC measures__________________?
- ✔✔Actual performance, measure of expected returns
✔✔Food strategy CASE - ✔✔shows the embodiment of strategy, from health to
convenience
✔✔Why you need to fail CASE - ✔✔shows the benefit of leveraging SWOT, analyzing
weaknesses to turn them into strengths
✔✔ - ✔✔1. Firm survival
2. Multiple stakeholder view
3. Simple accounting measures
4. Adjusted accounting measures
5. Event study method
✔✔performance - ✔✔rests on productive, value-creating assets
