Question
Legend Service Center just purchased an automobile hoist for $32,100. The hoist has an 8-year life and an estimated salvage value of $3,000. Installation costs
Legend Service Center just purchased an automobile hoist for $32,100. The hoist has an 8-year life and an estimated salvage value of $3,000. Installation costs and freight charges were $3,500 and $800, respectively. Legend uses straight-line depreciation.
The new hoist will be used to replace mufflers and tires on automobiles. Legend estimates that the new hoist will enable his mechanics to replace 5 extra mufflers per week. Each muffler sells for $75 installed. The cost of a muffler is $39, and the labor cost to install a muffler is $16. (a) Compute the cash payback period for the new hoist.
Cash payback period | 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 |
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