A proposed cost-saving device has an installed cost of $690,000. It is in Class 8 (CCA rate = 20%) for CCA purposes. 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%. 0 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 the problem of setting a bid price.) (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Cost savings $ 233,514.3 b. Suppose the device will be worth $97,000 in salvage (before taxes). How does this change your answer? (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Cost savings $215,162.4

A proposed cost-saving device has an installed cost of $690,000. It is in Class 8 (CCA rate = 20%) for CCA purposes. 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%. 0 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 the problem of setting a bid price.) (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Cost savings $ 233,514.3 b. Suppose the device will be worth $97,000 in salvage (before taxes). How does this change your answer? (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Cost savings $215,162.4

Name: Q- VPlease do not give a hand writting photo 23:09okencesProblem 10-4
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Description: Q- VPlease do not give a hand writting photo 23:09okencesProblem 10-48 Calculating Required Savings (LO5, 8)A proposed cost-saving device has an installed cost of $690,000. It is in Class 8 (CCA rate = 20%) for CCA purposes. It will actuallyfunction

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6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter9: Capital Budgeting Techniques

Section: Chapter Questions

Problem 11PROB

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