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The Scampini Supp The new truck cos operating cash flow Ceampini Supplies Company recently purchased a new delivery truck, truck cost $22,500, and it is
The Scampini Supp The new truck cos operating cash flow Ceampini Supplies Company recently purchased a new delivery truck, truck cost $22,500, and it is expected to generate net after-tax, o cash flows, including depreciation, of $6,250 per year. The truck, 5-vear expected life. The expected salvage values after tax adjust- for the truck are given here. The company's cost of capital is 10%. ments for the truck Year Annual Operating Cash Flow -$22,500 6,250 6,250 6,250 Salvage Value $22,500 17,500 14,000 11,000 5,000 6,250 6,250 a. Should the firm wate the truck until the end of its 5-year physical life? If not, then what its optimal economic life? b. Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project
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