A proposed cost-saving device has an installed cost of $659,000

jagguarpaw January 10, 2017 0 Comments

Question: A proposed cost-saving device has an installed cos…

A proposed cost-saving device has an installed cost of $659,000. The device will be used in a five-year project but is classified as three-year MACRS (MACRS Table) property for tax purposes. The required initial net working capital investment is $51,000, the marginal tax rate is 35 percent, and the project discount rate is 12 percent. The device has an estimated Year 5 salvage value of $76,000. What level of pretax cost savings do we require for this project to be profitable? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)