Question

Legend Service Center just purchased an automobile hoist for $32,700. The hoist has an 8-year life and an estimated salvage value of $3,350. Installation costs and freight charges were $3,710 and $870, 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 7 extra mufflers per week. Each muffler sells for $74 installed. The cost of a muffler is $35, and the labor cost to install a muffler is $16. (a) Compute the cash payback period for the new hoist. (Round answer to 2 decimal places, e.g. 10.50.) Cash payback period 4.45 years (b) Compute the annual rate of return for the new hoist. (Round answer to I decimal place, e.g. 10.5.) Annual rate of return Annual rate of return 11.0 11.0

Answer 1

Solution 6 computation of annual rate of return for the new hoist محہ لہ لہ لہم COH Of hoist = $ 32,400+ $3,76+5870 = $37.980 Average Investment = $37,2804 13,350 - 20.315 Annual depreciation - 37.280 (-) 3.350 8 $4.241.95 Annual net Income a Amount C) Particolans sales (7x70x sə) Less; cost of muffler (7x35x52) lessi labour cost (1687xsa) met cash flow Less Depreclation Net Income 26.936 (19.440) (5.824) 8372 uau1.gs 6,130.75

Annual rate of return = Average Average Annual Rofit. - X 100 Investment 4.13075 = x 100 20.315 = .20.33%