Question: 1672 Ryan, CFO for Hoffmann, Inc., recently purchased a new delivery truck. The new truck costs $46,000, and is expected to generate net after-tax operating

1672 1672 Ryan, CFO for Hoffmann, Inc., recently purchased a new delivery truck.

Ryan, CFO for Hoffmann, Inc., recently purchased a new delivery truck. The new truck costs $46,000, and is expected to generate net after-tax operating cash flows, including depreciation, of $27,000 per year for the 3 years that the firm is thinking about keeping it. The expected yearend abandonment values for the truck are given below. The company's cost of capital is 11 percent. What is the optimal economic life? A. The EAA method confirms that the economic life is 1 year. B. The EAA method confirms that the economic life is 3 years. C. The EAA method confirms that the economic life is 2 years. D. The truck should not be bought since none of the NPVs are positive. E. The truck should be kept for 3 years since the 3 -year option has the highest NPV

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