Question
(Ignore income taxes in this problem.) Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The auto was purchased for $22,000 and will have
(Ignore income taxes in this problem.) Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The auto was purchased for $22,000 and will have a 6-year useful life and a $5,100 salvage value. Delivering prescriptions (which the pharmacy has never done before) should increase gross revenues by at least $33,100 per year. The cost of these prescriptions to the pharmacy will be about $27,200 per year. The pharmacy depreciates all assets using the straight-line method. The payback period for the auto is closest to:
A. 3.7 years
B. 4.6 years
C. 4.6 years
D. 2.9 years
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