The Fast Supplies Company recently purchased a new delivery truck. The new truck cost $23,000, 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.

What is its optimal economic life?

Year ON Annual Operating Cash Flow ($23,000) 8,000 12,000 11,000 8,000 Salvage Value $23,000 17,000 15,000 8,000 0 3 4