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ACME Company recently purchased a new delivery truck. The initial cash outflow for the new truck is $30,000, and it is expected to generate after-tax
ACME Company recently purchased a new delivery truck. The initial cash outflow for the new truck is $30,000, and it is expected to generate after-tax cash flows of $8,000 per year. The truck has a 5- year expected life. The expected year-end abandonment values (after-tax salvage values) for the truck are given here. The company's WACC is 8.5%. What is the NPV of the year in which the truck should be abandoned? Year Annual After-Tax Cash Flow Abandonment Value 0 -30,000 1 8,000 24,000 2 8,000 20,000 3 8,000 12.000 st 8,000 4,000 5 8,000 O O 1,255 O 1,158 O 1,384 O 988 O 1,102
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