The Scampini Supplies Company recently purchased a new delivery truck. The new truck cost $25,000 and is expected to generate a net after-tax operating cash flows, including depreciation of $6400 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 costive capital is 10%

Year Annual Operating Cash Flow Salvage Value 0 -$25,000 $25,000 1 6,400 20,000 2 6,400 18,000 3 6,400 13,000 4 6,400 6,000 5 6,400 0

a. Should the firm operate the truck until the end of its 5-year physical life?If not, then what is 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?