LO2 30. Calculating Required Savings A proposed cost-saving device has an installed cost of $565,000. The device will be used in a five- year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $40,000, the tax rate is 23 percent, and the project discount rate is 12 percent. The device has an estimated Year 5 salvage value of $55,000. What level of pretax cost savings do we require for this project to be profitable
LO2 30. Calculating Required Savings A proposed cost-saving device has an installed cost of $565,000. The device will be used in a five- year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $40,000, the tax rate is 23 percent, and the project discount rate is 12 percent. The device has an estimated Year 5 salvage value of $55,000. What level of pretax cost savings do we require for this project to be profitable
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
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LO2 30. Calculating Required Savings A proposed cost-saving device has an installed cost of $565,000. The device will be used in a five- year project but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $40,000, the tax rate is 23 percent, and the project discount rate is 12 percent. The device has an estimated Year 5 salvage value of $55,000. What level of pretax cost savings do we require for this project to be profitable?
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