Chapter 6, Problem 33QAP

Summary Introduction

Adequate information:

Installation cost (IC) = $645,000

Useful life of the project = 5 years

Net working capital (NWC) = $55,000

Tax rate = 21% or 0.21

Discount rate, r = 12% or 0.12

Salvage value (SV) = $50,000

To compute: The pre-tax cost saving (S)

Introduction: Cost saving refers to the benefit realized by an organization by reducing the overall spending or expenses.