1. H Corp recently purchased a new delivery truck. The new truck has a cost of $56250 and is expected to generate after tax cash flows including depreciation of $15625 per year. The truck has a five year expected life. The expected year end abandonment Values (Salvage Value after tax adjustments) for the truck are given below. The companys cost of capital is 11%

Year Annual operating CF Abandonment Value

0 (56250) ----

1 15,625 43750

2 15,625 35000

3 15,625 27500

4 15,625 12500

5 15,625 0

Should the truck operate until the end of its 5 year life? If not what is the optimal economic life of the truck?

A) 1 year

B) 2 years

C) 3 years

D) 4 years

E) 5 years