Your firm recently purchased a new bulldozer. The bulldozer
costs $115,000, and is expected to generate net after-tax operating
cash flows, including depreciation, of $60,000 per year for the 4
years that the firm is thinking about keeping it. The expected
year-end abandonment values for the plant are given below. The
company’s cost of capital is 14 percent. What is the optimal
economic life?
CASH FLOW
ABANDONMENT VALUE
(115,000)
60,000
100,000
60,000
55,000
60,000
30,000
60,000
8,000
A.
The...