Cullumber Service Center just purchased an automobile hoist for $31,700. The hoist has an 8-year life and an estimated salvage value of $3,400. Installation costs and freight charges were $3,800 and $900, respectively. Cullumber uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Cullumber estimates that the new hoist will enable its 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. (a) Compute the cash payback period for the new hoist. Cash payback period years (b) Compute the annual rate of return for the new hoist. (Round answer to 2 decimal places, eg. 10.52%) Annual rate of return %
Cullumber Service Center just purchased an automobile hoist for $31,700. The hoist has an 8-year life and an estimated salvage value of $3,400. Installation costs and freight charges were $3,800 and $900, respectively. Cullumber uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Cullumber estimates that the new hoist will enable its 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. (a) Compute the cash payback period for the new hoist. Cash payback period years (b) Compute the annual rate of return for the new hoist. (Round answer to 2 decimal places, eg. 10.52%) Annual rate of return %
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Cullumber Service Center just purchased an automobile hoist for $31,700. The hoist has an 8-year life and an estimated salvage value
of $3,400. Installation costs and freight charges were $3,800 and $900, respectively. Cullumber uses straight-line depreciation.
The new hoist will be used to replace mufflers and tires on automobiles. Cullumber estimates that the new hoist will enable its
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.
(a)
Compute the cash payback period for the new hoist.
Cash payback period
years
(b)
Compute the annual rate of return for the new hoist. (Round answer to 2 decimal places, eg. 10.52%)
Annual rate of return
%
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