2018 2019

Actual % of sales Actual

Revenue
Crop Sales 818,564 96% 795,377
Crop Insurance 9,375 1% -
Custom work 8,672 1% 73,039
Other income 17,771 2% 18,020
Total Revenue 854,382 100% 886,436

Production Costs
Opening inventory 243,500 29% 251,700
Fertilizer and chemicals 220,399 26% 193,396
Land rent 10,320 1% 49,920
Seed 42,033 5% 50,655
Drying and storage 29,277 3% 52,789
Fuel 24,236 3% 26,805
Crop insurance 15,011 2% 12,089
Marketing fees and levies 2,827 0% 2,358
Inventory available for sale 587,603 69% 639,712
Closing inventory 251,700 29% 288,100
Cost of Goods Sold (COGS) 335,903 39% 351,612

Contribution Margin 518,479 61% 534,824

Amortization of capital assets (95,056) -11% (101,451)
Interest on long term debt (31,386) -4% (38,371)
Other expenses (57,573) -7% (67,909)

Income Before Management Salaries and Income Taxes 334,464 39% 327,093
Management salaries - 0% -
Income Before Income Taxes 334,464 39% 327,093
Income Taxes
Current 50,800 6% 44,000
Future 2,000 0% 3,400
52,800 6% 47,400
Net Income 281,664 33% 279,693
 2020
% of sales Actual % of sales

90% 1,049,760 85%

0% 68,201 5%
8% 80,606 6%
2% 42,999 3%
100% 1,241,566 100%

28% 288,100 23%

22% 189,326 15%
6% 52,320 4%
6% 45,593 4%
6% 41,755 3%
3% 33,952 3%
1% 9,414 1%
0% 2,768 0%
72% 663,228 53%
33% 312,100 25%
40% 351,128 28%

60% 890,438 72%

-11% (99,955) -8%
-4% (70,223) -6%
-8% (112,023) -9%

37% 608,237 49%

0% 45,540 4%
37% 562,697 45%

5% 49,500 4%
0% 17,200 1%
5% 66,700 5%
32% 495,997 40%
 2018 2019 2020
Actual Actual Actual
Assets
Current Assets
Cash 74,598 966 1,086
Accounts receivable 30,597 53,034 226,429
Income tax receivable - 7,779 -
Inventory 251,700 288,100 312,100
Prepaid expenses 38,000 37,000 38,000
Total Current Assets 394,895 386,879 577,615
Capital assets 1,990,204 4,447,098 4,557,216
Total Assets 2,385,099 4,833,977 5,134,831

Liabilities
Current Liablities
Bank indebtedness - 147,446 21,523
Accounts payable and accrued liabilities 12,084 61,081 67,280
Income taxes payable 14,110 - 505
Deferred taxes 37,000 37,000 39,000
Current portion of long term debt 40,000 606,629 84,010
Total Current Liabilities 103,194 852,156 212,318
Long term debt 790,000 1,272,619 1,716,729
Due to related company 400,000 535,000 535,000
Due to shareholder 55,183 854,384 839,769
Deferred taxes 20,000 23,400 38,600
Total Liabilities 1,368,377 3,537,559 3,342,416

Shareholders' equity
Share capital 141,125 141,127 141,127
Retain earnings 875,597 1,155,291 1,651,288
Total Shareholders' equity 1,016,722 1,296,418 1,792,415
Total liabilities and Shareholders' equity 2,385,099 4,833,977 5,134,831
Median Profitability Ratio for Ontario Field Crop Farms 2018 2019 2020
Contribution margin 0.66 0.65 0.64
EBIT 0.18 0.11 0.12
Interest expenses 0.02 0.04 0.03
EBT (Net Farm Income) 0.15 0.08 0.09

Dietrich Farms 2018 2019 2020

Contribution margin 0.61 0.60 0.72
EBIT 0.43 0.41 0.51
Interest expenses 0.04 0.04 0.06
EBT 0.39 0.37 0.45
Net Income 0.33 0.32 0.40
(as % of sales)

(as % of sales)
 2018
Assume total assets & current liabilities vary with sales
Farm uses long term debt to support RNF
Sales increase 50%
Actual % of sales Increase RNF
Assets
Current Assets
Cash 74,598 0.09 37,299
Accounts receivable 30,597 0.04 15,299
Income tax receivable - - -
Inventory 251,700 0.29 125,850
Prepaid expenses 38,000 0.04 19,000
Total Current Assets 394,895 0.46 197,448
Capital assets 1,990,204 2.33 995,102
Total Assets 2,385,099 2.79 1,192,550

Liabilities
Current Liablities
Bank indebtedness - - -
Accounts payable and accrued liabilities 12,084 0.01 6,042
Income taxes payable 14,110 0.02 7,055
Deferred taxes 37,000 0.04 18,500
Current portion of long term debt 40,000 0.05 20,000
Total Current Liabilities 103,194 0.12 51,597
Long term debt 790,000 718,457
Due to related company 400,000
Due to shareholder 55,183
Deferred taxes 20,000
Total Liabilities 1,368,377

Shareholders' equity
Share capital 141,125
Retain earnings 875,597 422,496
Total Shareholders' equity 1,016,722
Total liabilities and Shareholders' equity 2,385,099

Profit margin 33%

Dividends payout 0%
Current sales 854,382
Suppose 50% increase in sales 427,191
New sales 1,281,573
Spontenous assets increase 1,192,550
Spontenous liabilities increase 51,597
Increase in retained earnings 422,496
Required new funds 718,457

Sustainable Growth Rate #REF!

 2,019

After Actual % of sales Increase RNF After

111,897 966 0.001 483 1,449

45,896 53,034 0.06 26,517 79,551
- 7,779 0.01 3,890 11,669
377,550 288,100 0.33 144,050 432,150
57,000 37,000 0.04 18,500 55,500
592,343 386,879 0.44 193,440 580,319
2,985,306 4,447,098 5.02 2,223,549 6,670,647
3,577,649 4,833,977 5.45 2,416,989 7,250,966

- 147,446 0.17 - 147,446

18,126 61,081 0.07 30,541 91,622
21,165 - - - -
55,500 37,000 0.04 18,500 55,500
60,000 606,629 0.68 303,315 909,944
154,791 852,156 0.96 426,078 1,278,234
1,508,457 1,272,619 1,571,371 2,843,990
400,000 535,000 535,000
55,183 854,384 854,384
20,000 23,400 23,400
$ 2,293,222 3,537,559 6,813,242

141,125 141,127 141,127

1,298,093 1,155,291 419,540 1,574,831
1,439,218 1,296,418 1,715,958
3,577,649 4,833,977 7,250,966

32%
0%
886,436
443,218
1,329,654
2,416,989
426,078
 419,540
1,571,371

#REF!
 2,020

Actual % of sales Increase RNF After

1,086 0.001 543 1,629

226,429 0.182 113,215 339,644
- - - -
312,100 0.251 156,050 468,150
38,000 0.031 19,000 57,000
577,615 0.465 288,808 866,423
4,557,216 3.671 2,278,608 6,835,824
5,134,831 4.136 2,567,416 7,702,247

21,523 0.017 10,762 32,285

67,280 0.054 33,640 100,920
505 0.0004 253 758
39,000 0.031 27,750 66,750
84,010 0.068 42,005 126,015
212,318 0.171 106,159 318,477
1,716,729 654,257 2,370,986
535,000 535,000
839,769 839,769
38,600 38,600
3,342,416 4,421,309

141,127 141,127
1,651,288 743,996 2,395,284
1,792,415 2,536,411
5,134,831 5,134,831

40%
0%
1,241,566
620,783
1,862,349
2,567,416
106,159
 743,996
1,717,261

#REF!
Average Financial Ratios for all Ontartio Farms 2018 2019 2020
Current Ratio 1.922 1.996 2.165
Acid test (quick ratio) 0.450 0.462 0.484
Debt to equity 0.198 0.202 0.204
Return on assets 0.016 0.017 0.022
Return on equity 0.011 0.011 0.017
Interest coverage (Times interest earned) 2.247 2.215 2.994

Dietrich Farms 2018 2019 2020

Current Ratio 3.827 0.454 2.721
Acid test (quick ratio) 1.019 0.063 1.072
Debt to equity 1.346 2.729 1.865
Return on assets 0.118 0.058 0.097
Return on equity 0.277 0.216 0.277
Interest coverage (Times interest earned) 11.656 9.524 9.013
Current Assets/Current Liabilities
(Cash+Accounts Receivable)/Current Liablitilies
Total Debt/Total Equity
Net Income/Total Assets
Net Income/Total Equity
EBIT/Interest Higher interest coverage = stronger financial health

A higher debt-to-equity ratio indicates that a company has higher debt, wh

pany has higher debt, while a lower debt-to-equity ratio signals fewer debts.
Exhibit 7 - adjusted

Per acre Corn Soybean Wheat

expected price ($ per bushel) 5.3 16 7
expected yield (bushels per acre) 220 58 105
guaranteed yield for production insura 199 54.8 91
Record yield (bushels per acre) 248 70.1 121

Expected Income
Expected Sales 1166 928 735

Expected Expenses
Fertilizer 105 80 85
Seed 100 65 35
Production insurance premium 20 11 10.5
Fuel 20 17 20
Chemical 68 85 40
Custom work 13 30
Drying, storage, and other expenses 97 26 26.5
Total Expenses 423 284 247

Expected production profit 743 644 488

Most profitable crop: Corn

Timing of revenue 50% in Nov 50% in Oct 50% in Aug

50% in Dec 50% in Nov 50% in Sep
 2020 Per acre Nov Dec
Number of acres 150
Price per acre 20,500

Inflows
New mortgage on land % from a bank 75% 2,306,250
Total inflows 2,306,250 -

Outflows
Purchase of land (3,075,000)
Loan payment (principle+interest) (9,800)
Fertilizer (2021 corn) 105 (15,750)
Seed (2021 corn) 100 (15,000)
Total outflows (3,105,750) (9,800)

Net cash flows (799,500) (9,800)

Opening cash 500,000 (299,500)
Closing cash (299,500) (309,300)

2021 Per acre Jan Feb

Number of acres 150
Crop Corn

Inflows
Timing of crop revenue
Expected yield per acre (bushels) 220
Expected price 5.3
Crop inflows
Total inflows - -

Outflows (see Exhibit 8 for data)

Fertilizer: soybean for 2022 80
Chemical 68
Fuel 20
Drying and storage 97
Seed: soybean for 2022 65
Crop insurance 20
Property taxes 30 (1,125)
Custom work 13
Loan payment (principle+interest) (9,800) (9,800)
Total outflows (10,925) (9,800)

Net cash flows (10,925) (9,800)

Opening cash (309,300) (320,225)
Closing cash (320,225) (330,025)

2022 Per acre Jan Feb

Number of acres 150
Crop Soybean

Inflows
Timing of crop revenue
Expected yield per acre (bushels) 58
Expected price 16
Crop inflows
Total inflows - -

Outflows
Fertilizer: wheat for 2023 85
Chemical 85
Fuel 17
Drying and storage 26
Seed: wheat for 2023 35
Crop insurance 11
Property taxes 30 (1,125)
Custom work 0
Loan payment (principle+interest) (9,800) (9,800)
Total outflows (10,925) (9,800)

Net cash flows (10,925) (9,800)

Opening cash (310,950) (321,875)
Closing cash (321,875) (331,675)

2023 Per acre Jan Feb

Number of acres 150
Crop wheat

Inflows
Timing of crop revenue
Expected yield per acre (bushels) 105
Expected price 7
Crop inflows
Total inflows - -

Outflows
Fertilizer: corn for 2024 105
Chemical 40
Fuel 20
Drying and storage 26.5
Seed: corn for 2024 100
Crop insurance 10.5
Property taxes 30 (1,125)
Custom work 30
Loan payment (principle+interest) (9,800) (9,800)
Total outflows (10,925) (9,800)

Net cash flows (10,925) (9,800)

Opening cash (332,700) (343,625)
Closing cash (343,625) (353,425)
Total *Assume Dietrich's salary is not considered in the calculations

2,306,250

(3,075,000)
(9,800)
(15,750)
(15,000)
(3,115,550)

(809,300)
500,000
(309,300)

Mar Apr May June July Aug Sep Oct

- - - - - - - -

(5,100) (5,100)
(1,500) (1,500)
(14,550)

(3,000)
(1,125) (1,125) (1,125)
(975) (975)
(9,800) (9,800) (9,800) (9,800) (9,800) (9,800) (9,800) (9,800)
(9,800) (12,425) (18,875) (15,875) (10,925) (9,800) (11,300) (25,475)

(9,800) (12,425) (18,875) (15,875) (10,925) (9,800) (11,300) (25,475)

 (330,025) (339,825) (352,250) (371,125) (387,000) (397,925) (407,725) (419,025)
(339,825) (352,250) (371,125) (387,000) (397,925) (407,725) (419,025) (444,500)

Mar Apr May June July Aug Sep Oct

50%

69,600
- - - - - - - 69,600

(6,375) (6,375)
(1,275) (1,275)
(3,900)

(1,650)
(1,125) (1,125) (1,125)

(9,800) (9,800) (9,800) (9,800) (9,800) (9,800) (9,800) (9,800)

(9,800) (12,200) (17,825) (16,175) (10,925) (9,800) (11,075) (14,825)

(9,800) (12,200) (17,825) (16,175) (10,925) (9,800) (11,075) 54,775

(331,675) (341,475) (353,675) (371,500) (387,675) (398,600) (408,400) (419,475)
(341,475) (353,675) (371,500) (387,675) (398,600) (408,400) (419,475) (364,700)

Mar Apr May June July Aug Sep Oct

50% 50%

55,125 55,125
- - - - - 55,125 55,125 -
 (3,000.00) (3,000.00)
(1,500.00) (1,500.00)
(3,975.00)

(1,575.00)
(1,125) (1,125) (1,125)
(2,250.00) (2,250.00)
(9,800) (9,800) (9,800) (9,800) (9,800) (9,800) (9,800) (9,800)
(9,800) (12,425) (16,625) (15,050) (10,925) (9,800) (11,300) (14,900)

(9,800) (12,425) (16,625) (15,050) (10,925) 45,325 43,825 (14,900)

(353,425) (363,225) (375,650) (392,275) (407,325) (418,250) (372,925) (329,100)
(363,225) (375,650) (392,275) (407,325) (418,250) (372,925) (329,100) (344,000)
Nov Dec Total

50% 50%

87,450 87,450 174,900

87,450 87,450 174,900

(12,000) (12,000)
(10,200)
(3,000)
(14,550)
(9,750) (9,750)
(3,000)
(4,500)
(1,950)
(9,800) (9,800) (117,600)
(31,550) (9,800) (176,550)
-
55,900 77,650 (1,650)
 (444,500) (388,600) (309,300)
(388,600) (310,950) (310,950)

Nov Dec Total

50%

69,600 139,200
69,600 - 139,200

(12,750) (12,750)
(12,750)
(2,550)
(3,900)
(5,250) (5,250)
(1,650)
(4,500)
-
(9,800) (9,800) (117,600)
(27,800) (9,800) (160,950)

41,800 (9,800) (21,750)

(364,700) (322,900) (310,950)
(322,900) (332,700) (332,700)

Nov Dec Total

110,250
- - 110,250

(15,750) (15,750)
 (6,000)
(3,000)
(3,975)
(15,000) (15,000)
(1,575)
(4,500)
(4,500)
(9,800) (9,800) (117,600)
(40,550) (9,800) (171,900)

(40,550) (9,800) (61,650)

(344,000) (384,550) (332,700)
(384,550) (394,350) (394,350)
Number of acres 150
Annual land appreciation 10% 15%
Tax rate 15%
Discount rate 6%

Corn
Equipment depreciation per acre 75
Equipment depreciation 11,250
Tax saving due to depreciation 1687.5

Dietrich's annual salary 45,000

Working time on new land 10%

Year 10 Land Price 7,975,758 Assume 10% annual appreciation

Land Cost 3,075,000
Capital Gain 4,900,758
Taxable Capital Gain 2,450,379 50% of capital gain is taxable
Capital Gain Tax 367,557
After Tax Cash Inflows 7,608,201

Senario 1 *Cash outflows exclude loan repayments, ignore interest cost

Year Production Total Cash Inflows
0 2,306,250
1 Corn 174,900
2 Soybeans 139,200
3 Wheat 110,250
4 Corn 174,900
5 Soybeans 139,200
6 Wheat 110,250
7 Corn 174,900
8 Soybeans 139,200
9 Wheat 110,250
10 Corn 174,900

Senario 2 *Cash outflows include loan repayments, ignore tax saving on interest
Year Production Total Cash Inflows
0 2,306,250
1 Corn 174,900
2 Soybeans 139,200
3 Wheat 110,250
4 Corn 174,900
5 Soybeans 139,200
 6 Wheat 110,250
7 Corn 174,900
8 Soybeans 139,200
9 Wheat 110,250
10 Corn 174,900
 Soybeans Wheat
73 70
10,950 10,500
1642.5 1575

10% annual appreciation 12,440,090

307,500

apital gain is taxable

Total Cash Outflows Dietrich's Salary Net Cash Flow

(3,115,550) (809,300)
(58,950) (4,500) 111,450
(43,350) (4,500) 91,350
(54,300) (4,500) 51,450
(58,950) (4,500) 111,450
(43,350) (4,500) 91,350
(54,300) (4,500) 51,450
(58,950) (4,500) 111,450
(43,350) (4,500) 91,350
(54,300) (4,500) 51,450
(58,950) (4,500) 111,450

Total Cash Outflows Dietrich's Salary Net Cash Flow

(3,115,550) (809,300)
(176,550) (4,500) (6,150)
(160,950) (4,500) (26,250)
(171,900) (4,500) (66,150)
(176,550) (4,500) (6,150)
(160,950) (4,500) (26,250)
(171,900) (4,500) (66,150)
(176,550) (4,500) (6,150)
(160,950) (4,500) (26,250)
(171,900) (4,500) (66,150)
(176,550) (4,500) (6,150)
Depreciation After Tax Saving After Tax Cashflow
(687,905)
1,688 96,420
1,643 79,290
1,575 45,308
1,688 96,420
1,643 79,290
1,575 45,308
1,688 96,420
1,643 79,290
1,575 45,308
1,688 7,704,621 Add Land Sales
4,122,140 NPV

Depreciation After Tax Saving After Tax Cashflow

(687,905)
1,688 (3,540)
1,643 (20,670)
1,575 (54,653)
1,688 (3,540)
1,643 (20,670)
1,575 (54,653)
1,688 (3,540)
1,643 (20,670)
1,575 (54,653)
1,688 7,604,661 Add Land Sales
3,386,426 NPV
Number of acres 150
Annual land appreciation 10%
Tax rate 15%
Discount rate 6%

Corn
Equipment depreciation per acre 75
Equipment depreciation 11250
Tax saving due to depreciation 1687.5

Dietrich's annual salary 45,000

Working time on new land 10%

Year 10 Land Price 7,975,758 Assume 10% annual

Land Cost 3,075,000
Capital Gain 4,900,758
Taxable Capital Gain 2,450,379 50% of capital gain is taxable
Capital Gain Tax 367,557
After Tax Cash Inflows 7,608,201

*Cash outflows don't include loan repayments, ignore interest cost

Year Production Total Cash Inflows
0 2,306,250
1 Corn 174,900
2 Soybeans 139,200
3 Wheat 110,250
4 Corn 174,900
5 Soybeans 139,200
6 Wheat 110,250
7 Corn 174,900
8 Soybeans 139,200
9 Wheat 110,250
10 Corn 174,900
 Soybeans Wheat
73 70
10950 10500
1642.5 1575

19,039,589 Assume 20% annual increase

apital gain is taxable

Total Cash Outflows Dietrich's Salary Net Cash Flow

(3,115,550) (809,300)
(58,950) (4,500) 111,450
(43,350) (4,500) 91,350
(54,300) (4,500) 51,450
(58,950) (4,500) 111,450
(43,350) (4,500) 91,350
(54,300) (4,500) 51,450
(58,950) (4,500) 111,450
(43,350) (4,500) 91,350
(54,300) (4,500) 51,450
(58,950) (4,500) 111,450
Depreciation After Tax Saving After Tax Cashflow
(687,905)
1,688 96,420
1,643 79,290
1,575 45,308
1,688 96,420
1,643 79,290
1,575 45,308
1,688 96,420
1,643 79,290
1,575 45,308
1,688 7,704,621 Add Land Sales
$4,000,744.92 NPV
32% IRR
Crop Corn Soybeans Wheat
Expected yield per acre without drainage 220 58 105
Yield boost 10% 22 6 11
Expected price per acre 5 16 7
Additional revenue per acre 117 93 74
Additional revenue 17,490 13,920 11,025
Average revenue increase 14,145

Acres tiled 150

Price per acre for tile 1,500
Total investment 225,000
Tax rate 15%
Capital cost allowance (depreciation) 25%
Discount rate 6%
Expected yield boost 10%

Year UCC BeginningCCA UCC Ending

0 225,000 28,125 196,875
1 196,875 49,219 147,656
2 147,656 36,914 110,742
3 110,742 27,686 83,057
4 83,057 20,764 62,292
5 62,292 15,573 46,719
6 46,719 11,680 35,040
7 35,040 8,760 26,280
8 26,280 6,570 19,710
9 19,710 4,927 14,782
10 14,782 3,696 11,087
11 11,087 2,772 8,315
12 8,315 2,079 6,236
13 6,236 1,559 4,677
14 4,677 1,169 3,508
15 3,508 877 2,631
16 2,631 658 1,973
17 1,973 493 1,480
18 1,480 370 1,110
19 1,110 277 832
20 832 208 624
21 624 156 468
22 468 117 351
23 351 88 263
24 263 66 198
25 198 49 148
150 acre

Depreciation Tax Saving Investment Increase revenue

half year rule 4,219 (225,000)
7,383 14,145
5,537 14,145
4,153 14,145
3,115 14,145
2,336 14,145
1,752 14,145
1,314 14,145
985 14,145
739 14,145
554 14,145
416 14,145
312 14,145
234 14,145
175 14,145
132 14,145
99 14,145
74 14,145
55 14,145
42 14,145
31 14,145
23 14,145
18 14,145
13 14,145
10 14,145
7 14,145
After Tax Cashflow
(187,031)
19,406
17,560
16,176
15,138
14,359
13,775
13,337
13,009
12,762
12,578
12,439
12,335
12,257
12,199
12,155
12,122
12,097
12,079
12,065
12,054
12,047
12,041
 12,036
12,033
12,031
($47,491.16) NPV