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The Elberta Frunt Farm of Ontario always has hired transient workers to pick its annual cherry crop. Janessa Wright, the farm manager just recewed information
The Elberta Frunt Farm of Ontario always has hired transient workers to pick its annual cherry crop. Janessa Wright, the farm manager just recewed information on a cherry picking machine that is being purchased by many fruitfarms. The machine is a motorized device that shakes the cherry tree, causing the cherries to fall orto 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 $170,000 per year to transient workers to pick the cherries. b. The cherry picker would cost $270,000. 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 Annual out of pocket costs associated with the cherry picker would be cost of an operator and an assistant, $80.000 insurance $2,000; fuel, $13.000; and a maintenance contract. $19,000 Click here to view Exh) 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 2a Compute the simple rate of retum expected from the cherry picker 2b. Would the cherry picker be purchased If Elberta Fruit Farm's required rate of return is 1597 3a Compute the payback period on the cherry picker 3b. The Elberta Fruit Farm will not purchase equipment unless it was a payback period of five years or less Would the cherry picker be Durchased 4a Compute the internal rate of return promised by the cherry picker A. Based on this computation does it appear that the simple rate of return is an accurate guide investiment decisione Complete this question by entering your answers in the tabs below
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