ProDiem wal The Sorensen Supplies Company recently purchased a new delivery truck. The initial cash outflow for the new truck is $23,500, and it is expected to generate after-tax cash flows of $6,350 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 Abandonment Value Flow ($23,500) 6,350 $19,500 6,350 16,000 6,350 12,000 6,350 ৪,000 6,350 a. 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

ProDiem wal The Sorensen Supplies Company recently purchased a new delivery truck. The initial cash outflow for the new truck is $23,500, and it is expected to generate after-tax cash flows of $6,350 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 Abandonment Value Flow ($23,500) 6,350 $19,500 6,350 16,000 6,350 12,000 6,350 ৪,000 6,350 a. 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

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section9.A: Depreciation

Problem 1P

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