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Compute the annual rate of return for the new hoist

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Question - Sandhill Service Center just purchased an automobile hoist for $34,000. The hoist has an 8-year life and an estimated salvage value of $3,400. Installation costs and freight charges were $4,200 and $800, respectively. Sandhill uses straight-line depreciation.

The new hoist will be used to replace mufflers and tires on automobiles. Sandhill estimates that the new hoist will enable its mechanics to replace 5 extra mufflers per week. Each muffler sells for $77 installed. The cost of a muffler is $38, and the labor cost to install a muffler is $14.

Required -

(a) Compute the cash payback period for the new hoist.

(b) Compute the annual rate of return for the new hoist.

Reference no: EM133146501

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