The ABC Supplies Company recently purchased a new delivery truck. The new truck cost $25,000, and it is expected to generate the following new after-tax operating cash flows, including depreciation. The truck has a 4-year expected physical life. The expected salvage values after tax adjustments for the truck are given below. The companys cost of capital is 10 percent.

Year Annual Operating Cash Flow Salvage Value

0 ($25,000) $25,000

1 9,000 18,000

2 5,000 13,000

3 10,000 9,000

4 7,000 0

What is its optimal economic life?