Brady Service Center just purchased an automobile hoist for $32,340. The hoist has an 8-year life and an estimated salvage value of $3,310. Installation costs and freight charges were $3,602 and $880, respectively. Brady uses straight-line depreciation.
The new hoist will be used to replace mufflers and tires on automobiles. Brady estimates that the new hoist will enable his mechanics to replace 5 extra mufflers per week. Each muffler sells for $75 installed. The cost of a muffler is $37, and the labor cost to install a muffler is $17.
Compute the annual rate of return for the new hoist.