Gce Model Questions Vol1 2020 Agricultural Science Question 50

Practice objective / multiple choice question 50 from the 2020 Gce Model Questions Vol1 Agricultural Science examination.

Gce Model Questions Vol1 2020 Agricultural Science Objective / Multiple Choice Medium Difficulty
Question 50 GCE_MODEL_QUESTIONS_VOL1 • 2020 • AGRICULTURAL_SCIENCE • objective

A farmer is considering buying a milking machine costing \(\text{\u00A3}500{,}000\). The machine has a 5‑year life with no salvage value, reduces labour cost by \(\text{\u00A3}30{,}000\) per year and increases milk yield by 5 % on a herd that currently produces 10,000 L yr⁻¹. Milk sells for \(\text{\u00A3}120\) per litre. Annual maintenance of the machine is \(\text{\u00A3}5{,}000\). Calculate the annual net benefit of the machine and the pay‑back period. Is the investment justified within the machine's life?

Answer Options

A. Annual net benefit = \(\text{\u00A3}75{,}000\); pay‑back ≈ 6.7 years, which exceeds the 5‑year life, so the investment is not justified.
Correct Answer B. Annual net benefit = \(\text{\u00A3}85{,}000\); pay‑back ≈ 5.9 years, which exceeds the 5‑year life, so the investment is not justified.
C. Annual net benefit = \(\text{\u00A3}85{,}000\); pay‑back ≈ 4.2 years, which is within the 5‑year life, so the investment is justified.
D. Annual net benefit = \(\text{\u00A3}95{,}000\); pay‑back ≈ 5.3 years, which is within the 5‑year life, so the investment is justified.
Correct Answer
B
Correct Option:
Annual net benefit = \(\text{\u00A3}85{,}000\); pay‑back ≈ 5.9 years, which exceeds the 5‑year life, so the investment is not justified.

About This Question

This is Gce Model Questions Vol1 2020 Agricultural Science Question 50. It is one of the objective questions from the 2020 Gce Model Questions Vol1 Agricultural Science examination.

Difficulty level: Medium .

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