Legend 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. 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 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 (b) years Compute the annual rate of return for the new hoist. (Round answer to 2 decimal places, e.g. 10.52%.) Annual rate of return %
Legend 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. 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 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 (b) years Compute the annual rate of return for the new hoist. (Round answer to 2 decimal places, e.g. 10.52%.) Annual rate of return %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Legend 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. 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 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
(b)
Compute the annual rate of return for the new hoist. (Round answer to 2 decimal places, e.g. 10.52%.)
Annual rate of return
years
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