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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
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 10 percent.
Year | Annual Operating Cash Flow | Salvage Value | ||
0 | -$22,500 | $22,500 | ||
1 | 6,250 | 17,500 | ||
2 | 6,250 | 14,000 | ||
3 | 6,250 | 11,000 | ||
4 | 6,250 | 5,000 | ||
5 | 6,250 | 0 |
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
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