Meade Metals Inc. plans to start doing its own deliveries instead of using an outside service for

Question:

Meade Metals Inc. plans to start doing its own deliveries instead of using an outside service for which it has been paying $150,000 per year. To make the change, Meade will purchase a $200,000 truck that will depreciate straight line over 10 years to a $40,000 salvage value. Annual operating expenses are estimated at $80,000, including insurance, fuel, and maintenance on the truck, as well as the cost of a driver. Management plans to sell the truck after five years for $100,000. Develop the project’s five-year cash flows.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...