A proposed cost-saving device has an installed cost of $560,000. It is in Class 8 (CCA rate = 20%) for CCA purposes It will actuallyfunction for five years, at which time it will have no value. There are no working capital consequences from the investment, and the taxrate is 35%.a What must the pre-tax cost savings be for us to favour the investment? We require an 12% return. (Hint This one is a variation on theproblem of setting a bid price.) (Do not round your intermediate calculations. Round the final answer to 2 decimal pleces. Omit Ssign in your response.)Cost savingsb. Suppose the device will be worth $80.000 in salvage (before taxes). How does this change your answer? (Do not round yourintermediate calculations. Round the final answer to 2 decimal pieces. Omit S sign in your response.)Cost savings

Discounting is a way to find the PV of future amount by considering appropriate rate or PVF.…

A proposed cost-saving device has an installed cost of $560,000. It is in Class 8 (CCA rate = 20%) for CCA purposcs It will actually function for five years, at which time it will have no value. There are no working capital consequences from the investment, and the tax rate is 35%. a What must the pre-tax cost savings be for us to favour the investment? We require an 12% return. (Hint This one is a variation o problem of setting a bid price) (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit s sign in your response.) the Cost savings b. Suppose the device will be worth $80.000 in salvage (before taxes). How does this change your answer? (Do not round your Intermediate calculotions. Round the final answer to 2 decimal pieces. Omit S sign in your response.) Cost savings

A proposed cost-saving device has an installed cost of $560,000. It is in Class 8 (CCA rate = 20%) for CCA purposcs It will actually function for five years, at which time it will have no value. There are no working capital consequences from the investment, and the tax rate is 35%. a What must the pre-tax cost savings be for us to favour the investment? We require an 12% return. (Hint This one is a variation o problem of setting a bid price) (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit s sign in your response.) the Cost savings b. Suppose the device will be worth $80.000 in salvage (before taxes). How does this change your answer? (Do not round your Intermediate calculotions. Round the final answer to 2 decimal pieces. Omit S sign in your response.) Cost savings

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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sa
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