Bied's Pharmacy has purchased a small auto for delivery of prescriptions. The auto cost $28,000 and will be usable for seven years. Delivery of prescriptions (which the pharmacy has never done before) should increase revenues by at least $25,000 per year. The cost of these prescriptions will be about $18,000 per year. The pharmacy depreciates all assets by the straight-line method. (Ignore income taxes.)Required:a. Compute the payback period on the new auto.b. Compute the simple rate of return of the new auto.

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The Answer of Bied's Pharmacy has purchased a small auto for delivery of prescriptions. The auto cost $28,000 and will be usable for seven years. Delivery of prescriptions (which the pharmacy has never done before) should increase revenues by at least $25,000 per year. The cost of these prescriptions will be about $18,000 per year. The pharmacy depreciates all assets by the straight-line method. (Ignore income taxes.)Required:a. Compute the payback period on the new auto.b. Compute the simple rate of return of the new auto.

Bied's Pharmacy Has Purchased a Small Auto for Delivery of Prescriptions