Check my Problem 12-24 Simple Rate of Return; Payback Period; Internal Rote of Return (L012-1, LO12-3, LO12-6] The Elberta Fruit Farm of Ontario always has hired transient workers to pick its annual cherry crop. Janessa Wright, the farm manager just received information on a cherry picking machine that is being purchased by many fruit farms. The machine is a motorized device that shakes the cherry tree, causing 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 $150,000 per year to transient workers to pick the cherries. b. The cherry picker would cost $160,000. It would be depreciated using the straight-line method and it would have no salvage value at the end of its 10-year useful life. c Annual out of pocket costs associated with the cherry picker would be cost of an operator and an assistant, $90,000, insurance, $3,000, fuel, $12,000, and a maintenance contract, $15,000 Click here to view Exhibit 128.1 and Exhibit 128-2. 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 2a Compute the simple rate of return expected from the cherry picker 25. Would the cherry picker be purchased if Elberta Fruit Farm's required rate of return is 13%? 3a. Compute the payback period on the cherry picker 36. 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? 4a. Compute the internal rate of return promised by the cherry picker 4b Based on this computation does it appear that the simple rate of return is an accurate guide in investment decisions? Reg 1 Req 2A Req 2B Reg Req 3B Reg 4A Req 48 Determine the annual savings in cash operating costs that would be realized if the cherry picker were purchased. Annual savings in cash operating costs & Req1 Req 2A > Reg 1 Reg 2A Req 2B Req Req 3B Req 4A Req 4B Compute the simple rate of return expected from the cherry picker. (Round your answer to 2 decimal places.) Simple rate of return % Reg 1 Req 2A Rels2B Req Req 3B Req 4A Req 4B Would the cherry picker be purchased if Elberta Fruit Farm's required rate of return is 13%? Yes No Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B Reqa Req 3B Reg 4A Req 4B Compute the payback period on the cherry picker. (Round your answer to 2 decimal places.) Payback period years Complete this question by entering your answers in the tabs below. Req 1 Req 2A Reg 2B Reg 3A Rea 38 Req 4A Req 4B 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? OYes ON Reg 1 Req 2A Reg 2B Req 3A Req 3B Phale 4A Req 4B Compute the internal rate of return promised by the cherry picker. (Round your answer to the nearest whole percent.) Internal rate of return % Req 48 Reg 1 Reg 2A Reg 28 Reg 3B Reg 4 Req 3A Based on this computation, does it appear that the simple rate of return is an accurate guide in investment decisions? Yes ONO
