3. (4 points) Joe and Tonya Rodeo are going to buy a new truck for their ranch. Relevant information about the two trucks is given below. If the after tax discount rate is 5%, which truck should they purchase. The original cost is paid out in year 0, the projected after tax cash flows are paid out each year. The salvage value is recouped in the final year. (Hint: you need to do the least common denominator of time or an annual annuity equivalent.)

Truck A Truck B

Original cost $23,000 $19,000

Projected economic life 4 years 3 years

Projected after-tax annual cash flows $4,000 $3,800

Salvage Value $3,500 $3,000