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 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 $200,000 per year to transient workers to pick the cherries. b. The cherry picker would cost $250,000, and it would have an estimated 8-year useful life. The farm uses straight-line depreciation on all assets and considers salvage value in computing depreciation deductions. The estimated salvage value of the cherry picker is $80,000. c Annual out-of-pocket costs associated with the cherry picker would be: cost of an operator and an assistant, $98,000; insurance, $5,000; fuel, $15,000; and a maintenance contract, $20,000. 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 S 200,000 Present cost of transient workers Less out-of-pocket costs to operate the cherry picker: Fuel 15,000 V Insurance 5,000 98,000 Cost of an operator and assistant 20,000 Maintenance contract 138,000 S 62,000 Annual savings in cash operating costs