Company ABC purchased a delivery truck for 25000 on january 1,2012 the truck has an expected

The ABC Supplies Company recently purchased a new delivery truck. The new truck cost $25,000, and it is expected to generate the following new after-tax operating cash flows, including depreciation. The truck has a 4-year expected physical life. The expected salvage values after tax adjustments for the truck are given below. The company’s cost of capital is 10 percent.

            Year                 Annual Operating Cash Flow               Salvage Value

            0                                  ($25,000)                                             $25,000

            1                                       9,000                                              18,000

            2                                       5,000                                              13,000

            3                                     10,000                                                  9,000

            4                                       7,000                                                          0

What is its optimal economic life?