The Scampini Supplies Company recently purchased a new delivery truck. The new truck has an after-tax cost of $23,500, and it is expected to generate after-tax cash flows of$7,250 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 is8%.After-TaxYear0Annual After-Tax Cash FlowAbandonment Value($23,500)17,25027,25037,2507,250$17,50015,00013,0008,0007,25045a. What is the truck's optimal economic life? Round your answer to the nearest whole number.year(s)b. Would the introduction of abandonment values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project?-Select- v

Part (a): Optimal Economic LifeStep 1: Identify Cash Flows and Abandonment Values:Initial cost (Year…

Answered: The Scampini Supplies Company recently…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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