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 8%.

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 11 percent. Year Annual Operating Cash Flow Salvage Value 0 1 2 3 4 5 -$22,500 6,250 6,250 6,250 6,250 6,250 $22,500 17,500 14,000 11,000 5,000 0 a. What is the optimal number of years to operate the truck? Do not round intermediate calculations. Round your answers to the nearest whole number. years b. Would the introduction of salvage values, in addition to operating cash flows, ever reduce the expected NPV and/or IRR of a project? I. Salvage possibilities would have no effect on NPV and IRR. II. No. Salvage possibilities could only raise NPV and IRR. III. Yes. Salvage possibilities could only lower NPV and IRR. -Select-v

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 is 8%. After-Tax Year 0 Annual After-Tax Cash Flow Abandonment Value ($23,500) 1 7,250 2 7,250 3 7,250 7,250 $17,500 15,000 13,000 8,000 7,250 4 5 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

The Scampini Supplies Company recently purchased a new delivery truck. The new truck has an after-tax cost of $21,500, and it is expected to generate after-tax cash flows of $6,000 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 11%. Year 0 1 2 3 Annual After-Tax Cash Flow ($21,500) 6,000 6,000 6,000 4 5 After-Tax Abandonment Value $17,500 15,000 13,000 7,000 0 6,000 6,000 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?

Lakeside Inc. is considering replacing old production equipment with state-of-the-art technology that will allow production cost savings of $10,000 per month. The new equipment will have a five-year life and cost $420,000, with an estimated salvage value of $33,000. Lakeside's cost of capital is 7%. Lakeside Inc. uses a straight-line depreciation method. Required: Calculate the payback period and the accounting rate of return for the new production equipment. (Round your answers to 2 decimal places.) Payback period Accounting rate of return years %

APJ, Inc. is planning to purchase a new machine that will take six years to recover the cost. The new machine is expected to produce cash flow from operations, net of income taxes, of P4,500 a year for the first three years of the payback period and P3,500 a year of the last three years of the payback period. Depreciation of P3,000 a year shall be charged to income of the six years of the payback period. How much shall the machine cost? *   A. P12,000 B. P18,000 C. P24,000 D. P36,000

Johnson Wholesale Corporation has purchased a new piece of equipment for $644,000, with $46,000 of that total being costs for installation. After discussions with its accounting firm the company plans to depreciate the installation costs straight-line over 5 years. The cost of capital is 7.5% and the Tax Rate is 22%. Rounded to the nearest dollar, what is the present value of the cost of the equipment?

Rooney, Incorporated is considering the purchase of a new machine costing $700,000. The machine's useful life is expected to be 8 years with no salvage value. The straight-line depreciation method will be used. The net increase in annual after-tax cash flow is expected to be $156,000. Rooney estimates its cost of capital to be 12%. (The present value of a $1 annuity for 8 years at 12% is 4.968, and the present value of $1 to be received in 8 years is 0.404.) The net present value of the investment in the machine under consideration is: Multiple Choice $156,000. $75,008. $87,500. $126.800.

A new investment project requires a purchase of a new equipment with a cost of $575,000 , which will be depreciated straight-line to zero over its 4-year life. The investment lasts for four years, and will bring in an annual operating cash flow of $215,000. At the end of the four years, the equipment will be sold and result in an after tax salvage value of $25,000 . The investment will require an investment of working capital of $15,000 , initially and will be fully recovered at the end of year four. Assume the discount rate is 15 percent and the tax rate is 28 percent. What is last year's cash flow from the project?

The following data is associated with a proposed replacement project: A machine that originally cost $25,000 and was depreciated on a straight line basis has one year of its expected 5-year life remaining. Its current market value is $12,000. The corporate tax rate is 34%. The cash flow from disposing of the old machine, is: