Legend Service Center just purchased an automobile hoist for $32,500. The hoist has an 8-year life and an estimated salvage value of $3,470. Installation costs and freight charges were $3,580 and $840, 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 $74 installed. The cost of a muffler is $37, and the labor cost to install a muffler is $15.
(a) Compute the cash payback period for the new hoist. (Round answer to 2 decimal places, e.g. 10.50.) Cash payback period Entry field with incorrect answer years
(b) Compute the annual rate of return for the new hoist. (Round answer to 1 decimal place, e.g. 10.5.) Annual rate of return Entry field with incorrect answer%