Blue Service Center just purchased an automobile hoist for $35,000. The hoist ha

Question

Blue Service Center just purchased an automobile hoist for $35,000. The hoist has an 8-year life and an estimated salvage value of $3,000. Installation costs and freight charges were $3,300 and $700, respectively. Blue uses straight-line depreciation. The new hoist will be used to replace mufflers and tires on automobiles. Blue estimates that the new hoist will enable his mechanics to replace 5 extra mufflers per week. Each muffler sells for $72 installed. The cost of a muffler is $36, and the labor cost to install a muffler is $12. Compute the cash payback period for the new hoist.

Explanation / Answer

gaining $120 per week

35000-3000+4000 - 120x = 0
x = 300 weeks

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