Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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A proposed cost-saving device has an installed cost of $785,000. 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 $75,000, the tax rate is 25 percent, and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $115,000. 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.

A proposed cost saving device has an installed cost of $785,000. 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 $75,000, the tax rate is 25 percent, and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $115,000.
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.
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Transcribed Image Text:A proposed cost saving device has an installed cost of $785,000. 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 $75,000, the tax rate is 25 percent, and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $115,000. 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.
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