The Big Apple Farming Company is considering replacing fruit pickers with a fruit-picking machine…

The Big Apple Farming Company is considering replacing fruit
pickers with a fruit-picking machine. Each year, the company spends $80000 on
fruit pickers. These pickers will no longer be required if the fruit-picking
machine is acquired. The relevant costs are as follows:

You are required to assess this potential capital investment
by using the:

a payback method

b accounting rate of return method

c net present value method

d internal rate of return method.

You are also required to make a recommendation as to whether
to acquire the fruitpicking machine. Management would like the

The Big Apple Farming Company is considering replacing fruit
pickers with a fruit-picking machine. Each year, the company spends $80000 on
fruit pickers. These pickers will no longer be required if the fruit-picking
machine is acquired. The relevant costs are as follows:

You are required to assess this potential capital investment
by using the:

a payback method

b accounting rate of return method

c net present value method

d internal rate of return method.

You are also required to make a recommendation as to whether
to acquire the fruitpicking machine. Management would like the machine to:

– achieve a payback period of less than six years

– generate an accounting rate of return of at least 18 per
cent

– generate a positive net present value at an interest rate
of 10 per cent.