Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The auto was purchased for $28,000 and will have a 6-year useful life and a $4,000 salvage value. Delivering prescriptions (which the pharmacy has never done before) should increase gross revenues by at least $32,000 per year. The cost of these prescriptions to the pharmacy will be about $25,000 per year. The pharmacy depreciates all assets using the straight-line method. The payback period for the auto is closest to:

Question

Quizplus · Accepted Answer

The Answer of Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The auto was purchased for $28,000 and will have a 6-year useful life and a $4,000 salvage value. Delivering prescriptions (which the pharmacy has never done before) should increase gross revenues by at least $32,000 per year. The cost of these prescriptions to the pharmacy will be about $25,000 per year. The pharmacy depreciates all assets using the straight-line method. The payback period for the auto is closest to:

Buy-Rite Pharmacy Has Purchased a Small Auto for Delivering Prescriptions