A farmer plans to cultivate 5 ha of wheat. Expected yield is 4 t ha⁻¹. Variable cost is ₦150 000 per tonne produced and fixed overhead is ₦200 000. The expected market price is ₦250 000 per tonne. There is a 10 % chance of a drought that reduces the total yield by 30 % while costs remain unchanged. Calculate the expected profit and state whether the enterprise is financially viable (profit  0).

Question

A farmer plans to cultivate 5 ha of wheat. Expected yield is 4 t ha⁻¹. Variable cost is ₦150 000 per tonne produced and fixed overhead is ₦200 000. The expected market price is ₦250 000 per tonne. There is a 10 % chance of a drought that reduces the total yield by 30 % while costs remain unchanged. Calculate the expected profit and state whether the enterprise is financially viable (profit > 0).

Accepted Answer

₦1 740 000 expected profit; venture is viable

Gce Model Questions Vol1 2024 Agricultural Science Question 9

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