=Your firm, Agrico Products, is considering a tractor that would have a cost of $36,000, would increase pretax operating cash flows before taking account of depreciation,by $12,000 per year, and would be depreciated on a straight-line basis to zero over 5 years at the rate of $7,200 per year, beginning the first year. (Thus, annual cahs flows would be $12,000 of depreciation.) The mangers disagree about whether the tractor would last 5 years. The controller insists that she knows of tractors that have lasted only 4 years. The treasurer agree with the controller, but he argues that most tractors do give 5 years of service. The service manager then states that some last for as long as 8 years.

Given this discussion, the CFO ask you to prepare a scenario analysis to determine the importance of the tractos life on the NPV. USe a 40% margianl federal-plus-state tax rate, a zero salvage value, and a 8% WACC. assuming each of the indicated lives has the same probablilty of occuring (probabiliby=1/3), what is the tracts expected NPV.

Round to two deciamls

a. Tractos NPV if actual life is 5 years.

$_______

b. Tractos NPV is actual life is 4 years

$_________

c. Tractos NPv if actual life is 8 years

$________

d. Tractors expected NPV

$________