2. The Paktika Apple Orchard has always hired part-time workers to pick its annual apple crop. Fetullah Wasim, overseer of the orchard, has just received information on an apple picking machine that is being purchased by many competing orchards. The machine is a motorized device that shakes the apple tree, causing the apples to fall onto plastic tarps that funnel the apples into crates for shipping. Fetullah has gathered the following information to decide whether an apple picking machine would be a profitable investment for the Paktika Apple Orchard: a. Currently, the orchard is paying an average of $40,000 per year to transient workers to pick the apples. b. The apple picker would cost $94,500, and it would have an estimated 12-year useful life. The orchard uses straight-line depreciation on all assets and considers salvage value in computing depreciation deductions. The estimated salvage value of the cherry picker is $4,500. C. Annual out-of-pocket costs associated with the apple picker would be: cost of an operator and an assistant, $14,000; insurance, $200; fuel, $1,800; and a maintenance contract, $3,000.

2. The Paktika Apple Orchard has always hired part-time workers to pick its annual apple crop. Fetullah Wasim, overseer of the orchard, has just received information on an apple picking machine that is being purchased by many competing orchards. The machine is a motorized device that shakes the apple tree, causing the apples to fall onto plastic tarps that funnel the apples into crates for shipping. Fetullah has gathered the following information to decide whether an apple picking machine would be a profitable investment for the Paktika Apple Orchard: a. Currently, the orchard is paying an average of $40,000 per year to transient workers to pick the apples. b. The apple picker would cost $94,500, and it would have an estimated 12-year useful life. The orchard uses straight-line depreciation on all assets and considers salvage value in computing depreciation deductions. The estimated salvage value of the cherry picker is $4,500. C. Annual out-of-pocket costs associated with the apple picker would be: cost of an operator and an assistant, $14,000; insurance, $200; fuel, $1,800; and a maintenance contract, $3,000.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

The Elberta Fruit Farm of Ontario has always 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: Currently, the farm is paying an average of $270,000 per year to transient workers to pick the cherries. The cherry picker would cost $660,000. 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. Annual out-of-pocket costs associated with the cherry picker would be: cost of an operator and an assistant, $82,000; insurance, $4,000; fuel, $14,000; and a maintenance contract, $12,000. Click…
The Elberta Fruit Farm of Ontario has always 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: Currently, the farm is paying an average of $200,000 per year to transient workers to pick the cherries. The cherry picker would cost $250,000. 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, $98,000; insurance, $5,000; fuel, $15,000; and a maintenance contract, $20,000. Compute the…
A special contract had been offered to the company to serve as a special project manager to help the small oil palm farmers to buy their fruit bunch as they were complaining of malpractice by the middlemen that currently purchased the fruit. The proposal is to set a mobile buyers container truck to be stationed near the small farmers area to buy all the fruit bunch from them. This may be seen as a direct rival to the current buyers. The cost of each set of containers truck and weighting equipment is $200,000 and can be safely used for 5 years. The operating costs of running these containers truck is $50,000 per month. The office and corporate overheads on the project is estimated to be $30,000 per month. The expected purchased volume is about $30,000 a day with internal profit margin of 8%. The fruit bunch truck will operate 30 days a month. The group proposes to start with 20 trucks as a pilot project. a) Should the group venture into this project? Show your calculation b) What are…
Simple Rate of Return; Payback Period; Internal Rate of Return The Elberta Fruit Farm of Ontario 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 $40,000 per year to transient workers to pick the cherries. b. The cherry picker would cost $94,500, and it would have an estimated 12-year useful life. The farm uses straight-line depreciation on all assets and considers salvage value in computing depreciation expense. The estimated salvage value of the cherry picker is $4,500. c. Annual out-of-pocket costs…
Archie’s Apples grows organic apples and sells them to national grocery chains, local grocers, andmarkets. Archie purchased a machine for $450,000 that sorts the apples by size. The largest applesare sold as loose apples to the various stores, the medium sized apples are bagged and sold tothe grocers in their bagged state, and the smallest apples are sold to deep discounters or to a localmanufacturing plant that processes the apples into applesauce. Archie is considering keeping thesmall apples and processing them into apple juice that would be sold under Archie’s own label tolocal grocers. The small apples currently sell to the deep discounters and local manufacturers for$1.10 per dozen. The variable cost to prepare the small apples for sale, including transporting theapples, is $0.30 per dozen. Archie can sell each gallon of organic apple juice for $3.50 per gallon.It takes two dozen small apples to make one gallon of apple juice. The cost to produce the organicapple juice will be…
Greg has operated his shop for 2 years. He buys coffee from a local supplier and bakes the cinnamon rolls in-house. Your business consists of catering events and selling fine mixers. The plan is for you to use the premises Greg currently rents to give you an opportunity to display your cakes and demonstrate the mixers that you sell. You will also hire, train, and supervise staff to bake cookies and muffins sold in the shop. By offering a greater variety of baked goods, both of you would benefit. Another advantage is that the coffee shop will have one central location for selling the mixers. However, you want to have a better understanding of his growth, so you ask to see is balance sheets for the past two years. His comparative balance sheets are as follows: Greg's Cinnamon Rolls Condensed Balance Sheet 31-Oct 2021 2020 Assets Current Assets $10,360 $8,602 Property, plant, and equipment (net) 2,500 2,256…
My neighbor, Mrs. Dubois, is the accountant for the cranberry processing plant. The plant has a piece of equipment, nicknamed Harvey that is used to clean and prepare the harvested cranberries. Mrs. Dubois needs to determine if Harvey should be replaced with a newer, better version. Using the NPV tool, we will provide her a recommendation. Facts provided: 1. Old Cranberry Cleaner (Nickname: Harvey) Cost $260,000 2. Harvey’s Accumulated Depreciation $150,000 3. Cash Sales Price for Harvey $60,000 4. New Equipment Cost $448,000 5. New Equipment Depreciation (Each Year) $44,800 6. New Equipment Net Cash Revenues (Each Year) $482,000 7. New Equipment Net Cash Expenses (Each Year) $365,000 8. New Equipment Estimated Useful Life 10 Years 9. Tax Rate 40% 10. Cost of Capital 10% Step 1 A: Identify both the timing and amount of cash inflows and cash outflows (A) Compute the inflows & outflows for any…
Whispering Winds's Christmas Tree Farm Ltd. grows pine, fir, and spruce trees. The farm cuts and sells trees during the Christmas season and exports most of the trees to the United States. The remaining trees are sold to local tree-lot operators. It normally takes 12 years for a tree to grow to a suitable size, and the average selling price of a tree is $29. The biggest costs to the business are pest control, fertilizer, and pruning trees over the 12-year period. These costs average $12 per tree (assume these are incurred evenly over the 12-year growing cycle). Assume IFRS is used. Assume that the fair value less cost to sell (net realizable value) at the end of 2020 is $12 and the opening value was $7. Assume that the cost to sell are nil. Prepare the journal entries if the costs are capitalized each year. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O…
Maria owns a small apple orchard and press operation. After picking and selling the high-grade apples in their fresh state, she presses the remaining apples into juice. This process also yields pomace (a pulp like product). There is a market for both the juice and the pomace immediately after this joint pressing process is complete. The joint processing costs are $28,000. Both of these products can be processed further: the juice can be turned into hard cider, while the pomace can be turned into jam. The values of each product at different stages of completion, along with the additional costs that will be incurred if the products are processed further, are as follows. Apple juice/hard cider Apple pomace/jam Sales Value at Split-Off Additional Processing Cost Final Sales Value $37,600 $13,692 $108,000 9,400 4,908 19,000 (a) If Maria uses the sales value at split-off method to allocate the joint costs, how much will be allocated to each product? (Round proportion to 2 decimal places,…
The Ferndale Furniture Company produces custom furniture for walk-in customers. Products include coffee tables, shelving units, mirrors, and hutches and can be constructed with either pine or oak. Custom kitchen cabinetry and installation will also be considered during the slower winter season. The company is owned and operated by Ken McMann, who has one full-time employee working for him. Ken has worked in this industry for many years and has just started the company. Currently, for customer pricing inquiries, Ken provides a quote based on his best estimate and years of experience in the business and applies a 40% markup on cost. Ken’s son Owen has returned home for the summer after completing his first semester of an accounting program. Owen described to Ken the benefits of a job-order costing system to track costs and as a basis for quoting sales prices to prospective customers. Ken believes he could use this cost accounting system in his new business and sets aside a few hours to…
Lisa owns a small apple orchard and press operation. After picking and selling the high-grade apples in their fresh state, she presses the remaining apples into juice. This process also yields pomace (a pulp like product). There is a market for both the juice and the pomace immediately after this joint pressing process is complete. The joint processing costs are $32,000. Both of these products can be processed further: the juice can be turned into hard cider, while the pomace can be turned into jam. The values of each product at different stages of completion, along with the additional costs that will be incurred if the products are processed further, are as follows. Apple juice/hard cider Apple pomace/jam (a) Sales Value at Split-Off Additional Processing Cost Final Sales Value $39,950 $15,132 $93,000 7.050 5.168 20,000 If Lisa uses the sales value at split-off method to allocate the joint costs, how much will be allocated to each product? (Round
Marigold There produces a variety of soy products from soybeans and has just finished its first year of operations. Michael, the product manager, wants to evaluate the profitability of each product. Michael knows the process works essentially like this: the soybeans are processed in the company's manufacturing facility at a cost of $434,000, yielding both soy oil and soymeal. The soy oil can then be processed further into mayonnaise, while the soymeal can be processed further into animal feed. The quantities produced and sales values at the split-off point are as follows. 13,200 pounds 46,800 pounds Quantity of soy oil Quantity of soymeal Sales price of soy oil Sales price of soy meal $38.00 per pound $1.50 per pound (a) Using the physical quantities method, allocate the joint costs to the soy oil and the soymeal. (Round proportion to 2 decimal places, e.g. 0.25 and final answers to O decimal places, e.g. 5,125.) Allocated joint costs Soy Oil SA $ Soymeal $

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS