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7. In a typical year, J. B. Hunt Transport Services Inc. (JBHT) purchases hundreds of new over-the- road tractors. A certain type of tractor has
7. In a typical year, J. B. Hunt Transport Services Inc. (JBHT) purchases hundreds of new over-the- road tractors. A certain type of tractor has a retail price of $100,000. End-ofyear book values (based on MACRS-GDS for a 5-year property), salvage values, and annual operations and maintenance (0&M) costs over its useful life are provided in the following table. EOY Book Value Salvage Value 0&M Costs 1 $80,000 $53,000 $15,000 2 $48,000 $39,000 $21,000 3 $28,800 $28,000 $27,000 4 $17,280 $18,000 $34,000 5 $5,760 $14,000 $42,000 6 0 $6,000 $49,000 Determine the economic life of this type of tractor given that the MARR is 10% and the marginal tax rate is 40%
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