2b.

Would the cherry picker be purchased if Elberta Fruit Farms required rate of return is 11%?

	Yes
	No

3a.	Compute the payback period on the cherry picker.

3b.

The Elberta Fruit Farm will not purchase equipment unless it has a payback period of six years or less. Would the cherry picker be purchased?

	Yes
	No

4a.	Compute the internal rate of return promised by the cherry picker. (Round you answer to nearest whole percentage place. i.e. 0.1234 should be considered as 12%.)

John The Elberta Fruit Farm of Ontario has always hired transient workers to pick its annual cherry crop, Francie Wright, the farm manager, has just received information on a cherry machine that is being the cherries to fall onto plastic tarps that funnel the cherries into bins. Ms. Wright has gathered the following information to decide whether a cherry picker would be a profitable investment for the Elberta Fruit Farm: a. Currently, the farm is paying an average of $230,000 per year to translent workers to pick the cherries b. The cherry picker would cost $620,000. It would be depreciated using straight-line method and it would have no salvage value at the end of its 8-year useful life. C. Annual out-of-pocket costs associated with the cherry picker would be cost of an operator and an assistant, $91,000: insurance, $5,000; fuel, S13,000; and a maintenance contract, $16,000. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor using tables Required 1 Determine the annual savings in cash operating costs that would be realized if the cherry picker were purchased Less out-of-pocket costs to operate the cherry picker: Annual savings in cash operating costs 2a. Compute the simple rate of returi expected from the cherry picker. Simple Rate of Retur Choose Denominator: Choose Numerator: Simple rate of retum Simple rate of return