The Elberta Fruit Farm of Ontarlo has always hired transient workers to pick its annual cherry croporation 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 $230,000 per year to transient workers to pick the cherries. b. The cherry picker would cost $670,000. 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, $93,000; Insurance $2,000; fuel. $10,000, and a maintenance contract. $13,000. Click here to view Exhibit 14B-1 and Exhibit 148-2, 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 11%? 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? 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 quide in investment decisions? EXHIBIT 143-1 Present Value of SIT) Periods 59 58 1 6600 I 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 10 40 46 54 75 95 105 11% 12% 135 145 15% 165 175 185 199 205 21% 225 235 245 255 0.962 09520.9430.9350 926 09170.9090901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833082608200.813 0.806 0.800 0.925 0.9070.890 0.873 0.8570.842 0.X26 0.812 0.797 0.783 0.769 0.756 0.7430731 0.7180.706 0.694 0.883 0.672 0.661 0.650 0610 0889864 0840 0.116 0.794 0.772 0.751 0.731 0.71206930.67506580641 0.62406090.593 0.579 0564 0.351 0.537 0.5240.512 OSS 0.8230.792 0.763 0.735 0.708 0.6830.659 0.636 0.613059205720552 0.53405160.4990,4820.467 0,451 0.437 0.423 0.410 0.822 0.784 0.7470.7130681 0.650 0.621 0.593 0.567 0.543 05190.497 0.476 0.456 0437 0.419 0.402 0.386 0.370 0.3550 341 0.328 0.700.746 0.705 0.666 0.262 0.630 0.596 0.564 0.535 0.507 0.480 0.456.0.432 410 0.390 0.370 0352 0.335 0.3190303 0.289 0.275 0.760 0,711 0.65 0.623 0.5R30.547 0.313 0.4820,452 0.425 0.400 0376 0354 0333 0.3140.296 0279 0.263 0.249 0.235 0.222 0210 0.731 0.677 0.627 0.582 05400 502 04670434 0.404 0376 0351 0327 0.305 0.285 0.266 0.2490.233 0.21 0.2040.1910.179 0.168 0.703 0.6450.592 05440.500 0.460 0424 0.391 0361 0333 0.308 0.284 0.263 0243 0225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.676 0,614 0.558 0.5080463 04220.386 0352 0.322 0.295 0.270 0.247 0.227 0.208 0.1910.176 0.162 0.149 0.137 0.126 0.116 0.107 0.650 0.5650527 0.475 0.4290.38803500317 0.287 0.261 0.237 0.215 0.195 0.17 0.162 0.148 0.135 0.1230.112 0.1030.0940.086 0.6250357 0.49704440.397 0.356 0319 0.286 0.2570.231 0.208 0.187 0.168 0.152 0.1370.124 0.112 0.1020.092 0.03 0.076 0.069 0.001 0.530 0409 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.084 0.075 0.068 0.061 0.055 0.57705050442 0.388 0.30 0.299 0.263 0.232 0.205 0.1810.160 0.141 0.125 | 01110.09900880078 0.06900620.055 0.049 0.044 0.555 041 0417 0.362 0.315 0.275 0.29 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.0840074 0.065 0.057 0.051 0.045 0.040 0.035 0.534 0.45 0.394 0.319 01920252 0.2180.1880.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0047 0.042 0.036 0.032 0.028 05130436 0.371170.2700231 0.1980.170 0.146 0.125 0.108 0.093 0.080 0.069 0.000 0.02 0.045 0.039 0.034 0.030 0026 0.023 0.491041601500,296 0.250 0212 0.1800.153 0.10 0.11 0.0950081 0.05900590.051 00140038 0.032 0.028 0.024 0.021 0018 0.475 0.3 0.331 0.277 0.232 0.1940 1640.138 0.116 0098 0.0830.07000600051 0.043 0.0370031 0.027 0.023 0.020 0.0170.014 0456 077 0312 0.25% 0.215 0.178 0.149 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0019 0.016 0.014 0.012 0.439 0.359 0.294 0342 0.19 0.164 0.13 0.112 0.093 0.07700640053 0014003700310.025 0.022 ODIN ODISI 0013 0.0110.009 0.422 0.342 0.278 02260180 150 0.123 0.101 0.0830068 0.056 0.046 0.038 | 00320026 0.022 0.018 0015 0.013 0.011 0.009 0.007 0406 0.176.0.262 021 010 0.13 0.112 0.091 0.074 0.060 0.04900400033 0.027010220018 0.015 0.012 0.0100.009 0.007 0.006 0 3900 3100.247 019715 0.126 0.1020.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019 0,015 0.013 0.00 0.007 0.006 0.375 0295 023301840145 0.116 0.092 0074 0059 0.047 0038 0.030 0.024 0.0200016 0.03 0.0100009 0.0070006 0.005 0.004 0.361 0.28102200.122 0135 0.1060084 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.00 0.004 0.003 0.341 0.29 0.2 0.161 0.125 0.098 0.076 0.00 0.0470037 0.0290023 0.0180.014 0.0110.009 0.007 0.006 0.005 0.0040.003 0.002 0333 0.255 0.19 0.150 0.116 009 090054 0.042 003 0.026002000160012 0010 0.00 0.006 0.005 0004 0.003 0.002 0.002 0.321 0.24 0.185 0 141 10.107 0.0820630.048 0.037 00290022 0.017 | 0.014 0.0110.000.006 0.005 0.004 0.003 0.0020002 0002 0.308 0231 0.174 0.131 090075 0.037004400300026 0.02000150012 0.0090.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 0.250.14200006700160012002200150011 0.008 0.005 0004 0.003 0002 0.001 0.001 0.001 0.000 0000 0.000 0.000 TETOOLZO . OO SOOTO COOTO EXHIRIT 14B-2 Present Value of an Annuity of $1 in Arrears: 111-1(1+r)n) Periods 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 40 45 55 65 75 85 9 10% 119 12% 13% 14% 155 16% 17% 185 199 205 21% 22% 23% 24 25$ 0.9620952 0.9430.9350 926 0.917 0.909 0.901 08930.885 0877 0.870 0.862 0.85508470.8400833 0.826 08200813 0.806 0.80 1.886 1.850 1.83318081.7831,759 1.736 1.713 1690 1.668 1.6471.626160515851.566 1.54715281.5091492 147414571.44 2.7752.723 2.673/2.624257723312487 2.4442402236123222.283 2.246 2.210 2.174 2.140 2.106 20742.042 2011 1.9811.95 3.630 3.546 3.465 33873312 3.240 3.1703.102 3037 2.9742914 2.855 2.7982743 2.690 2.639 2589 2540 2.494 2.448 2.4042.36 4452 4.329 4.212 4.100 3.993 3.890 3.7913.696 3.605 3.517 3.433 3.352 3.274 3.1993.1273058 2.991 29262.864 2.803 2.745 2.689 5.2425.0764917 4.767 4623 4486 4355 4 231 4.111 3.9983.8893.784 3.6853.589 3.498 3410 3326 3245 3.167 3.092 3.020 2.95 6.0025.786 5582 539 5.206 5.03348684.71245644423 4.288 4,160403939223.8123.706 3.6053 508 3.416 3.327 3.242 3.16 6.733 6 463 6.210 1 5.971 5.747 5.535 5335 5.146 4.968 4.799 4.639 4,4874.3444.207 4,078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 74357.10R 6.802 6.515 61247 5.995 5.7595537 53285.132 | 4.9464.7724.607 4451 4.3034.1634.031 3.905 3.786 3.673 35663.463 8.111 7722736070246710 6.418 6.1455 889 56505.426 5.21650194.833 4659 4 494 43394.1924.0543.9233.799 3.682 3.571 8.760 8.3067887 7.499 7.139 6 MOS 6.495 6 207 5.9385.687 5.4535.2345.02948364656 4.486 4.327 4.1774035 3902 3.776 3.656 9.385 8.861838479437.5367.161 68141 6.492 6.1945918 5.660 54215.197 4988 4.793 4,611 44394.278 4.127 3.985 3.851 3.725 9.9869.3948538.3587.901 7487 7.103 6.750 6 424 6.1225.8425583 5.342 5.118 49104.715 4.533 4.3624.203 4.053 39123.780 10 5639 899 9.295 8.745 8.244 7.7867.36769826628 6302 6.0025.7245.4685.2295.00848024.611443242654.108 3.9623.824 11.118 10.1809,7129 108 85598.061 7.806 7.19168116,462 6.142 5.84755755.324 5.0924.876467544894315 4.1534.001 3.859 11.652 10 8 10.106 94178 851 8.313 7.824 7.379 69746604 6.2655.9545,668 5.405 5.162 4.938 4.730 4536 1574.189 4.033 3887 12.16611 274 10477 9.763 9.1228544 802275497.120 6.729 6.373 6,047 5.7495475 5.222 4.990 4.7754.576 4.39142194,059 3.910 12.659 11 600 10828 10.0599.728.756 2012.2022 2506840 6.467 | 6.1285 8185.534 5.273503348124608 4419 4.243 4.080 3.928 13.134 12.085 11.158 10.33696048.950 8.365783973666938 6.550 6.1985877 5584 5.316 5.070 4843 4.635 4442 | 4.263 4.097 3.942 135901246211470 10.5969.16 19.1298514796374697025 6,623 6 259 5.9295628 53535.1014870 4.6574460 4.2794.110 3 954 14.019 12.821 11.764 10.830100179.2928.64980757562 7.102 6.687 6312597356655.384 5.127 4.89146754476 4.29241213.963 14 45113163 12.042 061 10.2019.4428.2728.17676457.170 6.7436.35960115.6965.4105.1494.909 4.690 4488 4.302 4.130 3.970 14 5571348912.301 272 10 371 9.50 8.8838.266 7.7187.230 6.792 6.399 6,044 5.7235432 5.167 4.925 4.703 4.499 4.311 4.137 3.976 15 247 1799 125501146910 529 9.707 896583487.784 7.283 6835 6.434 6,073 5.746 5.451 5.182 4937 4.713 4.507 4.3IR 4.143 3.981 15,62214094 12.78311654 10.675 9.8239.077842278437330687364646,0975.766 54675.1954.948 4.721 4 514 4.323 4.147 3.985 15983141751300311.826 10 810 99299.161 8:48 7 N96 73726906 6.491 6.1185.783 5.405.20649564.728 4520 4.328 4.151 3.988 1633014 643 13.211|11.987 10 935 10.027 9.23785487943 7.4096 935 6514 6.136 5.798 5 492 5.21549544.734 4.524 4332 41543.990 16,663 49 13.406 12.137 11051 10.116 9.307.6027984 2441 6961 6 534 6.152 5.810 5.502 5.2234970 473945284335 4.157 3.992 169841514113591 12.278 11 158 10.1989.3708650 3.0227470 6983 6.551 6.166 5.823 5105.2294.9754.74345014337 4159 3.994 17 292 15 172 13.765 12.40212581027494278.69480557496700365666.1725.82955175.2154979 4.7464514 4 319 4.1602995 19.709 17 159 15 046 11333211.925 10.7579.77989518.244263471056.64262335.8715.545.25849974.76045444.347 4.166 3.999