Alameda Service Center just purchased an automobile hoise for $14,160. The hoist has a 6 year life and an estimated salvage value of $1,125. Installation costs were $3,010 and freight charges were $800. Alameda uses straight-line depreciation.

The new hoist will be used to replace mufflers and tires on automobiles. Alameda estimates that the new hoist will enable his mechanics to replace 4 extra mufflers per week. Each muffler sells for $86 installed. The cost of a muffler is $24, and the labor cost to install a muffler is $11.

a) Compute the payback period for the new hoist in years.

b) Compute the annual rate of return for the new hoist.