Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The a

Question

Buy-Rite Pharmacy has purchased a small auto for delivering prescriptions. The auto was purchased for $9,000 and will have a 6-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. The payback period for the auto is:

       3.0 years
       1.8 years
       2.0 years
       1.2 years

Explanation / Answer

3.0 years

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