4 Data Analysis
4.1 Results of the Survey
Fourteen farm consultants answered to the survey, from almost all
regions of France (Figure 13). Therefore, the results are not influenced by
only one CERFRANCE.
1 Region of the respondents
2
1
4
1
3
West North
North west East
South east South west
Center
Figure 13: Region of the CERFRANCE of the
respondents
Regarding the age and the gender, the major part of the
respondents are male consultants aged between 26 and 35 years old as we can see
in Table 12.
|
18-25 y
|
26-35 y
|
35-50 y
|
51- and more y
|
|
Age
|
1
|
11
|
2
|
-
|
|
Male
|
1
|
10
|
2
|
-
|
|
Female
|
-
|
1
|
-
|
-
|
Table 12: Age and gender of the respondents
Out of the 14 respondents, 13 said that they realized project
business plans for their customers. However, only 79% said that they used
discount factors to evaluate the value of their customers' companies in
question 5. Less surprising are the answers to question 6, where 89% answered
that they used the NPV method to estimate the profitability of a project (see
Table 13).
Do you realize project business plans for your customers?
Do you use discount factors to evaluate the value of your
customers' companies?
Do you use NPV to evaluate the profitability of your customers'
projects?
|
# of answers
|
Yes
|
No
|
NSP
|
|
14
|
13
|
1
|
-
|
|
14
|
11
|
2
|
1
|
|
9
|
8
|
1
|
-
|
Table 13: answers to question 4, 5 and 6
Regarding question 7, only 9 out of the 14 respondents
answered to the question (Table 14). It seems that the most popular method
among the farm consultants is to choose a discount factor based on the
experience, and loan's rate plus risk premium is the second most popular
method.
|
Percentage
|
# of answers
|
|
Loan's rate + risk premium
|
44%
|
4
|
|
T-bills + risk premium
|
33%
|
3
|
|
WACC
|
33%
|
3
|
|
Estimation based on experience
|
56%
|
5
|
|
Other (please specify)
|
11%
|
1
|
|
TOTAL
|
100%
|
9
|
Table 14: Answers of question 7: «how do you choose
the discount factors you use?»
Regarding the most important question of the survey, the
question 8, not all consultants are specialized in all the fields concerned by
the question. This explains why the number of answers is reduced (9 consultants
gave at least one answer for this question). However, the answers tend to
confirm that almost all farm consultants use really low discount factors (see
Table 15). The highest answer is 15% for grain producers. However, even this
answer is surprising, because this consultant uses a 5% discount factor for
cattle ranching, which seems to be a difference too important. There are merely
no reasons for such a difference in terms of risk premium between the two
different productions, and it is probable that this answer is only a typing
error.
|
# of answers
|
Mean
|
Median
|
Min
|
Max
|
|
Grain producers
|
6
|
5,5%
|
4,0%
|
1,0%
|
15,0%
|
|
Cattle ranching
|
6
|
4,0%
|
4,5%
|
1,0%
|
9,0%
|
|
Wine production
|
4
|
2,8%
|
2,5%
|
1,0%
|
6,0%
|
|
Other
|
7
|
3,3%
|
4,0%
|
1,0%
|
7,0%
|
Table 15: Answers of question8 «what discount factor
do you use usually for your customers? (ex given: 11%)»
Another element is surprising: means and medians are really
low for all production, with discount factors equivalent to the French 10 years
Government bond yield. This rate was recently at its record low at 2.422%
(Dobson, 2012). The risk premiums used by some practitioners are actually lower
than the 2% used at the CERFRANCE Isère. The low number of bankruptcy
observed in the sector (1.6%o in 2011 for Rhone Alpes) may explain that
practitioners using rates based on experience use really low risk premium. Most
of the consultants do not use a loan's rate plus 2% risk premium, as this
method would give results closer to a 5 to 6% interval (regarding the loan's
rate observed in the sector).
|
# of
answers
|
percentage
|
|
Necessary for the discernment of your recommendations
|
7
|
78%
|
|
Useful to improve the discernment of your recommendations
|
2
|
22%
|
|
Not useful regarding the efficiency of the tools you already
use
|
-
|
-
|
|
The WACC and the discount factors are not useful in your
recommendations
|
-
|
-
|
|
TOTAL
|
9
|
100%
|
Table 16: Answers of question 9: «If you were
proposed a tool to estimate the WACC of the farms of your region to use it as a
discount factor, how would you consider this tool?»
Finally, question 9 (Table 16) implicitly confirmed that
consultants are not really secured with the tools they use. 78% of the
respondents considered that a tool to estimate the WACC of the farms of their
region would be necessary to improve the discernment of their recommendation,
and the remaining 22% considered it as useful.
The major highlights of the survey are:
- Consultants use the loan rate plus risk premium model.
The risk premiums used seem to be lower than 2%,
- The most popular method it to choose estimation based
on the experience,
- Most of the consultants would find necessary to have
new tools to improve their methods.
| 
