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The Sorensen Supplies Company recently purchased a new delivery truck. The initial cash outflow for the new truck is $22,500, and it is expected to

The Sorensen Supplies Company recently purchased a new delivery truck. The initial cash outflow for the new truck is $22,500, and it is expected to generate after-tax cash flows of $7,200 per year. The truck has a 5-year expected life. The expected year-end abandonment values (after-tax salvage values) for the truck are given below. The company's WACC is 9%.

Year Annual After-Tax Cash Flow Abandonment Value
0 ($22,500) -
1 7,200 $16,500
2 7,200 13,000
3 7,200 11,000
4 7,200 6,000
5 7,200 0
  1. What is the truck's optimal economic life? Round your answer to the nearest whole number.

    _____ year(s)

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