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Legend Service Center just purchased an automobile hoist for $33,700. The hoist has an 8-year life and an estimated salvage value of $3,640. Installation costs and freight charges were $3,550 and $820, 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 6 extra mufflers per week. Each muffler sells for $72 installed. The cost of a muffler is $39, and the labor cost to install a muffler is $13.

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

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

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M92740466

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