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Compute the annual rate of return for the new hoist

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Question: Legend Service Center just purchased an automobile hoist for $33,600. The hoist has an 8-year life and an estimated salvage value of $3,290. Installation costs and freight charges were $4,220 and $780, 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 $76 installed. The cost of a muffler is $38, and the labor cost to install a muffler is $14.

(a) Compute the cash payback period for the new hois Cash payback period years

(b) Compute the annual rate of return for the new hoist. (Round answer to 1 decimal place, e.g. 10.5.)

Reference no: EM131815911

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