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Compute the cash payback period for the new hoist

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Question - Peyton Service Center just purchased an automobile hoist for $42,350. The hoist has an 8-year life and an estimated salvage value of $3,810. Installation costs and freight charges were $3,766 and $880, respectively. Peyton uses straight-line depreciation.

The new hoist will be used to replace mufflers and tires on automobiles. Peyton estimates that the new hoist will enable his mechanics to replace 6 extra mufflers per week. Each muffler sells for $80 installed. The cost of a muffler is $37, and the labor cost to install a muffler is $18.

Compute the cash payback period for the new hoist.

Compute the annual rate of return for the new hoist.

Reference no: EM131805015

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