Question
Cullumber Service Center just purchased an automobile hoist for $37,300. The hoist has an 8-year life and an estimated salvage value of $3,800. Installation costs
Cullumber Service Center just purchased an automobile hoist for $37,300. The hoist has an 8-year life and an estimated salvage value of $3,800. Installation costs and freight charges were $3,400 and $900, respectively. Cullumber uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Cullumber estimates that the new hoist will enable its mechanics to replace 5 extra mufflers per week. Each muffler sells for $74 installed. The cost of a muffler is $40, and the labor cost to install a muffler is $14. (a) Compute the cash payback period for the new hoist.
Cash payback period | enter the cash payback period in years | years |
(b) Compute the annual rate of return for the new hoist. (Round answer to 2 decimal places, e.g. 10.52%.)
Annual rate of return | enter the annual rate of return in percentages rounded to 2 decimal places % |
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