A proposed cost-saving device has an installed cost of $795,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes (MACRS schedule). The required initial net working capital investment is $79,000, the tax rate is 22 percent, and the project discount rate is 11 percent. The device has an estimated Year 5 salvage value of $121,000. What level of pretax cost savings do we require for this project to be profitable? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Answer is complete but not entirely correct. Pretax cost savings $ 194,191.50 x
A proposed cost-saving device has an installed cost of $795,000. The device will be used in a five-year project but is classified as three-year MACRS property for tax purposes (MACRS schedule). The required initial net working capital investment is $79,000, the tax rate is 22 percent, and the project discount rate is 11 percent. The device has an estimated Year 5 salvage value of $121,000. What level of pretax cost savings do we require for this project to be profitable? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Answer is complete but not entirely correct. Pretax cost savings $ 194,191.50 x
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 5P
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