What is the optimal number of years to operate the truck

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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 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.

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

What is the optimal number of years to operate the truck? Do not round intermediate calculations. Round your answers to the nearest whole number.

Reference no: EM132502729

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