Cardinal Pharmacy has purchased a small auto for delivery of prescriptions. The auto cost $28,000 and will be usable for four years. Delivery of prescriptions (which the pharmacy has never done before) should increase revenues by at least $40,000 per year. The cost of these prescriptions will be about $30,000 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 Cardinal Pharmacy has purchased a small auto for delivery of prescriptions. The auto cost $28,000 and will be usable for four years. Delivery of prescriptions (which the pharmacy has never done before) should increase revenues by at least $40,000 per year. The cost of these prescriptions will be about $30,000 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.

Cardinal Pharmacy Has Purchased a Small Auto for Delivery of Prescriptions