(Ignore income taxes in this problem.) Buy-Rite Pharmacy has purchased a small a
ID: 2376275 • Letter: #
Question
(Ignore income taxes in this problem.) Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The auto was purchased for $9,000 and will have a 6-year useful life and a $3,000 salvage value. Delivering prescriptions (which the pharmacy has never done before) should increase gross revenues by at least $5,000 per year. The cost of these prescriptions to the pharmacy will be about $2,000 per year. The pharmacy depreciates all assets using the straight-line method. The payback period for the auto is:
Explanation / Answer
Annual cash inflow = 5000- 2000 = $3000
The payback period for the auto = 9000/3000 = 3 Year
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.