Economic Life The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operating cash flows, including depreciation, of $6,250 per year. The truck has a 5-year expected life. The expected salvage values after tax adjustments for the truck are given below. The company's cost of capital is 12.5 percent. Year Annual Operating Cash Flow 0 1 2 3 4 5 -$22,500 6,250 6,250 6,250 6,250 6,250 Salvage Value $22,500 17,500 14,000 11,000 5,000 0 a. What is the optimal number of years to operate the truck? Do not round intermediate calculations. Round your answers to the nearest whole number. years -Select- v b. Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project? I. Yes. Salvage possibilities could only lower NPV and IRR. II. Salvage possibilities would have no effect on NPV and IRR. III. No. Salvage possibilities could only raise NPV and IRR. Check My Work

Economic Life The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $22,500, and it is expected to generate net after-tax operatirg cash flows, including depreciation, of $6,250 per vear. The truck has a 5 . year expected life. The expected salvage values after tax adjustmenta for the truck are grven below. The company's cost of capital is 12.5 percent. a. What is the optimal number of years to operate the truck? Do not round intemedate calculations: Found your answers to the nearest whole number years b. Would the introduction of salvage values, in addition to operating cash flows, ever feduce the expected tipV and/or thut of a project? 1. Yes. Salvage possibilities could only lawer NPV and 1RR. 11. Salvage possibilities would have no effect on NPV and the. III. No. Salvage possibilities could only raise NPV and tBR