A proposed cost-saving device has an installed cost of $825,000. 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 $91,000, the tax rate is 23 percent, and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $139,000. 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. Pretax cost savings
A proposed cost-saving device has an installed cost of $825,000. 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 $91,000, the tax rate is 23 percent, and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $139,000. 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. Pretax cost savings
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
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Problem 28P: Friedman Company is considering installing a new IT system. The cost of the new system is estimated...
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![A proposed cost-saving device has an installed cost of $825,000. 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 $91,000, the tax rate is 23 percent, and the project discount rate is
9 percent. The device has an estimated Year 5 salvage value of $139,000. 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.
Pretax cost savings](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F33310fa9-ec46-4d3e-a4b9-aa9daa39b326%2Fd5a89445-5319-41a8-af2f-a94c38002e2c%2Fusrdlya_processed.png&w=3840&q=75)
Transcribed Image Text:A proposed cost-saving device has an installed cost of $825,000. 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 $91,000, the tax rate is 23 percent, and the project discount rate is
9 percent. The device has an estimated Year 5 salvage value of $139,000. 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.
Pretax cost savings
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