Question
Brady Service Center just purchased an automobile hoist for $31,120. The hoist has an 8-year life and an estimated salvage value of $3,790. Installation costs
Brady Service Center just purchased an automobile hoist for $31,120. The hoist has an 8-year life and an estimated salvage value of $3,790. Installation costs and freight charges were $3,710 and $750, respectively. Brady uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Brady estimates that the new hoist will enable his mechanics to replace 7 extra mufflers per week. Each muffler sells for $72 installed. The cost of a muffler is $40, and the labor cost to install a muffler is $16.
I computed the cash payback period to be 6.11 years, but I can't seem to figure out the annual rate of return for the new hoist.
So my question is:
1. Compute the annual rate of return for the new hoist.
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