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

Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions.The auto was purchased for $9,000 and will have a six-year useful life and a $3,000 salvage value.Delivering prescriptions (which the pharmacy has never done before) should increase gross revenues by at least $5,000 per year.The cost of these prescriptions to the pharmacy will be about $2,000 per year.The pharmacy depreciates all assets using the straight-line method.What is the payback period for the auto? (Ignore income taxes in this problem.)

A) 1.2 years.
B) 1.8 years.
C) 2.0 years.
D) 3.0 years.

Correct Answer:

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