Alameda Service Center just purchased an automobile hoist for $15,300. The hoist has a 5-year life and an estimated salvage value of $1,199. Installation costs were $3,080, and freight charges were $890. Alameda uses straight-line depreciation.
The new hoist will be used to replace mufflers and tires on automobiles. Alameda estimates that the new hoist will enable his mechanics to replace 6 extra mufflers per week. Each muffler sells for $80 installed. The cost of a muffler is $28, and the labor cost to install a muffler is $12.
(a) Compute the payback period for the new hoist.