20 20 Jackson Cotter, CFO for Cotter Equipment recently purchased a tractor. The new tractor costs...
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20 20 Jackson Cotter, CFO for Cotter Equipment recently purchased a tractor. The new tractor costs $60,000, and is expected to generate net after-tax operating cash flows, including depreciation, of $25,000 per year for the 4 years that the firm is thinking about keeping it. The expected year-end abandonment values for the tractor are given below. The company's cost of capital is 12 percent. What is the optimal economic life? CASH FLOW (60,000) ABANDONMENT VALUE 25,000 25,000 25,000 48,000 38,000 20,000 5,000 25,000 c. The economic life is 4 3 a. The economic life is 2 years since the 2-year EAA is $1,131 higher than the next highest EAA. b. The economic life is years since the 4-year EAA is $346 higher than the next highest EAA. years since the 3-year EAA is $414 higher than the next highest EAA. year since the 1-year EAA is $138 higher than the next highest EAA. years since the 4-year EAA is $623 higher than the next highest EAA. d. The economic life is 1 e. The economic life is 4 Calculate taum Mon adi Calculate the 11.28 page 8 20 20 Jackson Cotter, CFO for Cotter Equipment recently purchased a tractor. The new tractor costs $60,000, and is expected to generate net after-tax operating cash flows, including depreciation, of $25,000 per year for the 4 years that the firm is thinking about keeping it. The expected year-end abandonment values for the tractor are given below. The company's cost of capital is 12 percent. What is the optimal economic life? CASH FLOW (60,000) ABANDONMENT VALUE 25,000 25,000 25,000 48,000 38,000 20,000 5,000 25,000 c. The economic life is 4 3 a. The economic life is 2 years since the 2-year EAA is $1,131 higher than the next highest EAA. b. The economic life is years since the 4-year EAA is $346 higher than the next highest EAA. years since the 3-year EAA is $414 higher than the next highest EAA. year since the 1-year EAA is $138 higher than the next highest EAA. years since the 4-year EAA is $623 higher than the next highest EAA. d. The economic life is 1 e. The economic life is 4 Calculate taum Mon adi Calculate the 11.28 page 8
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