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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
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 6 percent.
What is the optimal number of years to operate the truck? Do not round intermediate calculations. Round your answers to the nearest whole number.
\begin{tabular}{ccr} Year & Annual Operating Cash Flow & Salvage Value \\ \hline 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 \end{tabular}Step by Step Solution
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