AGEC 440 ACTUAL FINALS ANSWERS AND
QUESTIONS SET A+
✔✔ROIC (return on invested capital) - ✔✔Determines a firm's return on capital for a
period t.
✔✔ROIC= - ✔✔Operating profits / Invested Capital
✔✔If ROIC is greater than WACC then it is _______ normal returns, but if ROIC is less
than WACC then it is __________ normal returns. - ✔✔Above; Below
✔✔WACC (weighted average cost of capital) - ✔✔measures the cost of capital (debt to
equity). Reflects expected firm value
✔✔EP(economic profit)= - ✔✔Invested Captal * (ROIC-WACC)
✔✔Tobins q= - ✔✔Firm market value/ replacement cost of assets
✔✔Event Studies - ✔✔Determines the economic value (before and after) the
implementation of a value creating strategy
✔✔Steps in Event Case Methods: - ✔✔1) Determine the event (nature of event,start
and end dates)
2) Estimate firm historical performance from CAPM (prior to event)
3) Determine excess returns (XR) during event period
4) Calculate Cumulative effect of new event (strategy)
✔✔Limitations of Event Studies - ✔✔-Event can be kept as proprietary information
- Depends on CAPM model estimates
-Restricted to discrete events
-Cannot account for emergent strategies
✔✔Measures of Firm Performance - ✔✔Firm Survival
Multiple Stakeholder view
, Simple accounting measures
Adjusted Accounting measures
Event Study Method
✔✔Is competitive advantage sustainable in the long run? - ✔✔Depends if the strategy is
known by other players in the market and if the competitive advantage is replicable or
imitable.
✔✔ What is agribusiness - ✔✔Agribusiness can be viewed as a number of interrelated
sub sectors which work together formally and informally to produce goods and services.
✔✔Agribusiness is a __________________. - ✔✔System
✔✔What is a driver of the agribusiness system? - ✔✔Consumer sovereignty
✔✔Consumer Sovereignty - ✔✔over arching principle that impacts agribusiness
system. Provision of food products and services that satisfy consumer well being.
✔✔Distinctive characteristics of the agribusiness sector - ✔✔-Food is intertwined with
culture, domestically and internationally
- Uncertainty underlying biologic basis of crop and livestock production
- Political Intervention across sub sectors and between nations (US farm bill)
- Ag and Food Technology development
• Private and public funded in food production (yield gains) and processing (product
innovations)
- Competitive Structures: Highly concentrated
• Pork processing, Grain and Oilseed processing, Seed industry
✔✔Education for agribusiness management - ✔✔Brings the skills and expertise of
different business functions together to implement strategy.
✔✔Goals of Agribusiness management - ✔✔Focus on the decisions and actions of the
managers with in the food and agribusiness sector.
To understand and improve the performance of decision makers.
✔✔Decision making: - ✔✔Biased(organizational cultural influences, power)
Subjective(experience)
Information processing limitations
Leadership and Charisma
Entrepreneurial
✔✔Implications for agribusiness management - ✔✔Economic analysis has much to
contribute but not likely to be sufficient in itself
QUESTIONS SET A+
✔✔ROIC (return on invested capital) - ✔✔Determines a firm's return on capital for a
period t.
✔✔ROIC= - ✔✔Operating profits / Invested Capital
✔✔If ROIC is greater than WACC then it is _______ normal returns, but if ROIC is less
than WACC then it is __________ normal returns. - ✔✔Above; Below
✔✔WACC (weighted average cost of capital) - ✔✔measures the cost of capital (debt to
equity). Reflects expected firm value
✔✔EP(economic profit)= - ✔✔Invested Captal * (ROIC-WACC)
✔✔Tobins q= - ✔✔Firm market value/ replacement cost of assets
✔✔Event Studies - ✔✔Determines the economic value (before and after) the
implementation of a value creating strategy
✔✔Steps in Event Case Methods: - ✔✔1) Determine the event (nature of event,start
and end dates)
2) Estimate firm historical performance from CAPM (prior to event)
3) Determine excess returns (XR) during event period
4) Calculate Cumulative effect of new event (strategy)
✔✔Limitations of Event Studies - ✔✔-Event can be kept as proprietary information
- Depends on CAPM model estimates
-Restricted to discrete events
-Cannot account for emergent strategies
✔✔Measures of Firm Performance - ✔✔Firm Survival
Multiple Stakeholder view
, Simple accounting measures
Adjusted Accounting measures
Event Study Method
✔✔Is competitive advantage sustainable in the long run? - ✔✔Depends if the strategy is
known by other players in the market and if the competitive advantage is replicable or
imitable.
✔✔ What is agribusiness - ✔✔Agribusiness can be viewed as a number of interrelated
sub sectors which work together formally and informally to produce goods and services.
✔✔Agribusiness is a __________________. - ✔✔System
✔✔What is a driver of the agribusiness system? - ✔✔Consumer sovereignty
✔✔Consumer Sovereignty - ✔✔over arching principle that impacts agribusiness
system. Provision of food products and services that satisfy consumer well being.
✔✔Distinctive characteristics of the agribusiness sector - ✔✔-Food is intertwined with
culture, domestically and internationally
- Uncertainty underlying biologic basis of crop and livestock production
- Political Intervention across sub sectors and between nations (US farm bill)
- Ag and Food Technology development
• Private and public funded in food production (yield gains) and processing (product
innovations)
- Competitive Structures: Highly concentrated
• Pork processing, Grain and Oilseed processing, Seed industry
✔✔Education for agribusiness management - ✔✔Brings the skills and expertise of
different business functions together to implement strategy.
✔✔Goals of Agribusiness management - ✔✔Focus on the decisions and actions of the
managers with in the food and agribusiness sector.
To understand and improve the performance of decision makers.
✔✔Decision making: - ✔✔Biased(organizational cultural influences, power)
Subjective(experience)
Information processing limitations
Leadership and Charisma
Entrepreneurial
✔✔Implications for agribusiness management - ✔✔Economic analysis has much to
contribute but not likely to be sufficient in itself
