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Bishop Drug Store has purchased a small van for delivery of prescriptions. The van cost $28,000 and will be usable for four years. Delivery of
Bishop Drug Store has purchased a small van for delivery of prescriptions. The van cost $28,000 and will be usable for four years. Delivery of prescriptions (which the store has never done before) should increase revenues by at least $40,000 per year. The cost of these prescriptions will be about $30,000 per year. The firm depreciates all assets by the straight-line method. (Ignore income taxes in this problem.) Required: a. Compute the payback period on the new van. Show your work!! b. Compute the simple rate of return of the new van. Show your work
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