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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
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 fol information to decide whether a cherry picker would be a profitable investment for the Elberta Fruit Farm 9 a Currently, the farm is paying an average of $210,000 per year to transient workers to pick the cherries b. The cherry picker would cost $550,000. It would be depreciated using the 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, $95,000, insurance, $4,000; fuel, $12,000, and a maintenance contract, $15,000 Click here to view Exhibit 138-1 and Exhibit 138-2, 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 return expected from the cherry picker Simple Rate of Returrn : Simpler -Simple r Choose Denominator: Choose Numerator: Epic Here
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