Legend Service Center just purchased an automobile hoist for$37,200. The hoist has an 8-year life and an estimated salvagevalue of $3,400. Installation costs and freight charges were $2,600and $800, respectively. Legend uses straight-line depreciation. Thenew hoist will be used to replace mufflers and tires anautomobiles. Legend estimates that the new hoist will enable hismechanics to replace 5 extra mufflers per week. Each muffler sellsfor $72 installed. The cost of a muffler is $37, and the labor costto install a muffler is $15.
(a) Compute the cash payback period for the new hoist.Cash payback period = _______ YEARS
(b) Compute the annual rate of returnfor the new hoist. (Round answer to 2 decimal places, e.g.10.529.)
Annual rate of return = ________
