(Ignore income taxes in this problem.) Betterway Pharmacy has purchased a small auto for delivery of prescriptions. The auto cost $30,000 and will be usable for five years. Delivery of prescriptions (which the pharmacy has never done before) should increase revenues by at least $29,000 per year. The cost of these prescriptions will be about $21,000 per year. The pharmacy depreciates all assets by the straight-line method.
Required:
a. Compute the payback period on the new auto.
b. Compute the simple rate of return of the new auto.

Question

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The Answer of (Ignore income taxes in this problem.) Betterway Pharmacy has purchased a small auto for delivery of prescriptions. The auto cost $30,000 and will be usable for five years. Delivery of prescriptions (which the pharmacy has never done before) should increase revenues by at least $29,000 per year. The cost of these prescriptions will be about $21,000 per year. The pharmacy depreciates all assets by the straight-line method.
Required:
a. Compute the payback period on the new auto.
b. Compute the simple rate of return of the new auto.

(Ignore Income Taxes in This Problem