The sales price for Pasture equivalents is zero. Check the feed prices on the last section of the Budgets.

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1 File: M&m FINFLO 2006 Warning The sales price for Pasture equivalents is zero. Check the feed prices on the last section of the Budgets.

2 Max and Marlene Profit FINLRB: Succession example Anyplace, Eastern Oregon File: M&m FINFLO 2006 User: Bart Eleveld FINPACK Printed 01/24/2008 6:51:14 AM PLAN DESCRIPTION Total crop acres 1,200 Total pasture acres 2,550 Total labor hours 2,680 Change in farm assets -9,000 Change in farm liabilities -9,000 Crop Plan Yield/Acre Share Wheat, Cash Winter 65.0 bu. 100 % Barley, Feed Spring 30.0 cwt. 100 % Fallow % Int. Pasture, Irrigated 6.0 aum 100 % 50.0 Pasture, private rangeland 0.3 aum 100 % 2,500.0 Csh W. Wheat, with 65.0 bu. 100 % - Fd S Barley, with 30.0 cwt. 100 % - Fallow, with management % - Csh W. Wheat, with 65.0 bu. 67 % - Fd S Barley, with 30.0 cwt. 67 % - Fallow, with management - 67 % - Livestock Plan Unit Sales/Unit Beef Cow-Calf Cow 0.41 head 80 Cow-Calf, with managemtn Cow 0.41 head - Barley equivalents (cwt.) Produced 12,000 Fed 125 Balance 11,875 Hay equivalents (ton) Produced - Fed 40 Balance -40 Pasture equivalents (AUM) Available 1,050 Used 640 Balance 410

3 Max and Marlene Profit Succession example Page 2 01/24/2008 6:51:14 AM PROFITABILITY INCOME STATEMENT (Typical Year) Barley equivalents $ 5.00/cwt. 59,376 Wheat, Cash Winter $ 3.50/bu. 91,000 Str Calves $ 95.00/cwt. 16,359 Hfr Calves $ 90.00/cwt. 3,528 Cull breeding livestock 14,968 Misc. livestock income 576 Custom work income 13,500 (A) Gross farm income 199,307 Seed 7,600 Fertilizer 21,600 Crop chemicals 10,225 Crop insurance 2,160 Irrigation energy 450 Crop custom hire 2,000 Purchased Hay $ 90.00/ton 3,600 Purchased feed 960 Veterinary 1,240 Supplies 440 Livestock marketing 560 Interest 48,641 Fuel & oil 15,950 Repairs 6,500 Custom hire 890 Hired labor 10,000 Real estate taxes 8,540 Farm insurance 990 Utilities 2,700 Dues & professional fees 350 Miscellaneous 3,790 (B) Total cash farm expense 149,186 (C) Net cash farm income 50,121 Depreciation 30,250 (D) Net farm income 19,871

4 Max and Marlene Profit Succession example Page 3 01/24/2008 6:51:14 AM PROFITABILITY MEASURES (Market) Net farm income (D) 19,871 Labor & management earnings (D-E) -55,177 Rate of return on farm assets (H/I) 2.0 % Rate of return on farm equity (J/K) -0.6 % Operating profit margin (H/N) 21.2 % Asset turnover (N/I) 9.4 % (E) Interest on farm net worth (K* 6%) 75,048 (F) Farm interest paid 48,641 (G) Value operators labor & mgt 27,237 (H) Return on farm assets (D+F-G) 41,275 (I) Total farm assets 2,079,721 (J) Return on farm equity (D-G) -7,366 (K) Total farm net worth 1,250,800 (N) Value of farm production 194,747 LIQUIDITY CASH FLOW (Typical Year) Net cash farm income (C) 50,121 Nonfarm income (+) 48,500 Net cash available (=) 98,621 Family living (-) 30,000 Income taxes and social security (-) 15,601 (R) Cash available for principal payments (=) 53,020 Farm interest paid (+) 48,641 Cash avail. for principal and interest (=) 101,661 Implement Dealer 19,458 Individual 20,506 Contract For Deed 38,345 VISA Credit Card 2,950 Auto loan 2,645 Operating loan interest 4,293 (S) Total scheduled principal and interest (-) 88,197 Cash available after loan payments (=) 13,464 Annual capital replacement 40,000 Principal paid on intermediate debts 23,864 (T) Cash required for replacement (-) 16,136 (U) Cash surplus or deficit (=) -2,672

5 Max and Marlene Profit Succession example Page 4 01/24/2008 6:51:14 AM LIQUIDITY MEASURES Cash available for principal payments (R) 53,020 Annual farm long term principal pymts (-) 10,097 Nonfarm debt payments (P & I) (-) 5,595 (V) Cash available for farm intermed. debt (=) 37,328 (W) Farm intermediate debt to be served 145,000 Years to turnover farm intermed. debt (W/V) 3.9 Surplus as a percent of payments (U/(S+T)) -2.6 % Cash farm expense as % of income (B/A) 74.9 % Farm interest as % of value of prod. (F/N) 25.0 % Farm debt payments as % of value of prod % SOLVENCY BALANCE SHEET (Market) Current farm assets 80,321 Intermediate farm assets (+) 378,400 Long term farm assets (+) 1,621,000 Nonfarm assets (+) 82,500 (X) Total assets (=) 2,162,221 Current farm liabilities 111,364 Intermediate farm liabilities (+) 122,477 Long term farm liabilities (+) 294,121 Nonfarm liabilities (+) 7,045 Deferred liabilities (+) 312,171 (Y) Total liabilities (=) 847,178 Net worth (X-Y) 1,315,042

6 Max and Marlene Profit Succession example Page 5 01/24/2008 6:51:14 AM SOLVENCY MEASURES Current percent in debt % Current & intermediate pct in debt 51.0 % Long term percent in debt 18.1 % Nonfarm percent in debt 8.5 % Total percent in debt (Y/X) 39.2 % NET WORTH CHANGE (Typical Year) Net farm income 19,871 Nonfarm income (+) 48,500 Family living (-) 30,000 Income taxes and social security (-) 15,601 Nonfarm loan interest (-) 968 Net worth change per year (=) 21,803 FINANCIAL STANDARDS MEASURES Liquidity Current ratio 0.72 Working capital -31,044 Solvency Farm debt to asset ratio 39.9 % Farm equity to asset ratio 60.1 % Farm debt to equity ratio 66.3 % Profitability Rate of return on farm assets 2.0 % Rate of return on farm equity -0.6 % Operating profit margin 21.2 % Net farm income 19,871 Repayment Capacity Term debt coverage ratio % Capital replacement margin 13,464 Efficiency Asset turnover 9.4 % Operating expense ratio 50.4 % Depreciation expense ratio 15.2 % Interest expense ratio 24.4 % Net farm income ratio 10.0 %

7 Max and Marlene Profit Succession example Page 6 01/24/2008 6:51:14 AM CROP AND LIVESTOCK PRODUCTION Wheat, Cash Winter bu. 26,000 Barley, Feed Spring cwt. 12,000 Fallow - Pasture, Intensive aum 300 Pasture aum 750 Str Calves head sold 33 Hfr Calves head sold 8 Str Calves head sold - Hfr Calves head sold - SENSITIVITY ANALYSIS Effect Of A 2 % Decrease In All Enterprises Net farm income 16,143 Cash surplus or deficit -4,979 Net worth change per year 19,496 Effect Of A 10 % Decrease In All Enterprises Net farm income 1,228 Cash surplus or deficit -16,148 Net worth change per year 8,327

8 Max and Marlene Profit Succession example Page 7 01/24/2008 6:51:14 AM INVESTMENT DETAIL Capital Sales current inventory 9,000 Total capital sales 9,000 LOAN DETAIL Current liabilities Original principal balance 91,962 Sale of current inventory -9,000 Resulting principal balance 82,962 Implement Dealer Original principal balance 80,000 Individual Original principal balance 65,000 Contract For Deed Original principal balance 300,000 VISA Credit Card Original principal balance 2,500 Auto loan Original principal balance 4,500 Bank Original principal balance - Relatives Original principal balance - Farm Credit Service Original principal balance - Bank Original principal balance -

9 Max and Marlene Profit Succession example Page 8 01/24/2008 6:51:14 AM NOTES This is the "what if" for no major changes in plans. It answers the "where am I now?" question in the long run with average prices and yields, and equilibrium acreages of the various alternatives. For this particular case study it looks at the future if Junior does not come back to the farm but goes on to his own independent life instead. That's not to say he won't eventually take over the farm, but the transition will not be a part of this.