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Legend Service Center just purchased an automobile hoist for $33, 800. The hoist has an 8-year life and an estimated salvage value of $3, 140.
Legend Service Center just purchased an automobile hoist for $33, 800. The hoist has an 8-year life and an estimated salvage value of $3, 140. Installation costs and freight charges were $4, 260 and $900, 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 $74 installed. The cost of a muffler is $38, and the labor cost to install a muffler is $16. (a) Compute the cash payback period for the new hoist. (b) Compute the annual rate of return for the new hoist
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