The Elberta Fruit Farm of Ontarlo 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 $290,000 per year to transient workers to pick the cherries. b. The cherry picker would cost $680,000. 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 $84,000; Insurance, $3,000 fuel, $11,000; and a maintenance contract, $14,000, Click here to view Exhiblu12B1 and Exhibit:12B-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. 2b. Would the cherry picker be purchased if Elberta Fruit Farm's required rate of return is 20%? 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 four years or less. Would the cherry picker be purchased? 4a. Compute the internal rate of return promised by the cherry picker. 45. Based on this computation, does it appear that the simple rate of return is an accurate guide In Investment decisions? Complete this question by entering your answers in the tabs below. Req 1 Reg 2A Reg 2B Req 3A Reg 38 Req 4A Req 4B Determine the annual savings in cash operating costs that would be realized if the cherry picker were purchased, Annual savings in cash operating costs Fee Req 2A > Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 28 Req 3A Reg 3B Reg 4A Req 48 Compute the simple rate of return expected from the cherry picker. (Round your answer to 2 decimal places.) Simple rate of retum Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reh 20 Reg 3A Reg 38 Reg 4 Reg 48 Would the cherry picker be purchased If Elberta Fruit Farm's required rate of return is 20%? Oros ONO Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 28 Req3A Reg 38 Req 4A Reg 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. Reg 1 Reg 2A Reg 28 Req 3A theq 38 Reg 4A Req 48 The Elberta Fruit Farm will not purchase equipment unless it has a payback period of four years or less. Would the cherry picker be purchased? Oves ONO Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Reg 28 Req 3A Reg 38 RD 4A Reg 48 Compute the internal rate of return promised by the cherry picker (Round your answer to the nearest whole percent) Inlethal rate of retum Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 20 Reg 3A Reg 38 Reg 4 Red 48 Based on this computation, does it appear that the simple rate of return is an accurate guide in investment decisions? Ores ONO
