Compute the cash payback period for the new hoist

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Reference no: EM13777562

Brady Service Center just purchased an automobile hoist for $34,480. The hoist has an 8-year life and an estimated salvage value of $3,890. Installation costs and freight charges were $3,337 and $840, respectively. Brady uses straight-line depreciation.

The new hoist will be used to replace mufflers and tires on automobiles. Brady estimates that the new hoist will enable his mechanics to replace 6 extra mufflers per week. Each muffler sells for $73 installed. The cost of a muffler is $41, 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.

Reference no: EM13777562

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