Crane Service Center just purchased an automobile hoist for $31,500. The hoist has an 8-year life...

Transcribed Image Text:

Crane Service Center just purchased an automobile hoist for $31,500. The hoist has an 8-year life and an estimated salvage value of $3,800. Installation costs and freight charges were $4,100 and $800, respectively. Crane uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Crane estimates that the new hoist will enable its mechanics to replace 5 extra mufflers per week. Each muffler sells for $75 installed. The cost of a muffler is $39, and the labor cost to install a muffler is $16. (a) Compute the cash payback period for the new hoist. Cash payback period years (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 % Crane Service Center just purchased an automobile hoist for $31,500. The hoist has an 8-year life and an estimated salvage value of $3,800. Installation costs and freight charges were $4,100 and $800, respectively. Crane uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Crane estimates that the new hoist will enable its mechanics to replace 5 extra mufflers per week. Each muffler sells for $75 installed. The cost of a muffler is $39, and the labor cost to install a muffler is $16. (a) Compute the cash payback period for the new hoist. Cash payback period years (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 %

Answer rating: 100% (QA)

To calculate the cash payback period and annual rate of return for the new hoist we need to consider the initial cost salvage value installation costs ... View the full answer