A proposed cost-saving device has an installed cost of ($480,000.) The device will be used in a

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A proposed cost-saving device has an installed cost of $$480,000.$ The device will be used in a five-year project, but is classified as three-year MACRS property for tax purposes. The required initial net working capital investment is $$35,000,$ 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 $$80,000.$ What level of pretax cost savings do we require for this project to be profitable?

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Hassan Imtiaz

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