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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 $36,800. The hoist has an 8-year life and an estimated salvage value of $3,800. Installation costs and freight charges were $4,100 and $700, 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 $72 installed. The cost of a muffler is $38, and the labor cost to install a muffler is $14.

Compute the cash payback period for the new hoist.

Compute the annual rate of return for the new hoist.

Reference no: EM132927171

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