The capital budgeting commmittee for Sears Holdings Corporation is meeting. Sears has several divisions an done of these divisions of Sears, operates...

The capital budgeting commmittee for Sears Holdings Corporation is meeting. Sears has several divisions an done of these divisions of Sears, operates a large fleet of vans. Sears' management is evaluating whether it is optimal to operate new vans for two, three, of four years before replacing them. The managers have estimated the investment outlay, annual after-tax operating expenses, and after-tax salvage cash flows for each of the service lives. Because revenues and some operating costs are unaffected by the choice of service life, they were ignored in the analysis. Sears' opportunity cost of funds is 10 percent. The table below gives the cash flows in thousands of dollars.

Service Life