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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
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 9 percent. Year Annual Operating Cash Flow Salvage Value 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 a. What is the optimal number of years to operate the truck? Do not round intermediate calculations. Round your answers to the nearest whole number.
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