Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A proposed cost-saving device has an installed cost of $730,000. The device will be used in a five-year project but is classified as three-year MACRS

A proposed cost-saving device has an installed cost of $730,000. 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 $55,000, the marginal tax rate is 35 percent, and the project discount rate is 9 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? Refer to chart below.

image text in transcribed

Property Class Year Three-Year 33.33% 44.45 14.81 7.41 Seven-Year 14.29% 24.49 17.49 12.49 8.93 8.92 8.93 4.46 Five-Year 2 3 4 5 6 7 20.00% 32.00 19.20 11.52 11.52 5.76

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Institutional Asset Management

Authors: Frank J Fabozzi, Francesco A Fabozzi

1st Edition

9811220034, 9789811220036

More Books

Students also viewed these Finance questions