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A proposed cost-saving device has an installed cost of $810,000. 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 $810,000. 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 $85,000, the marginal tax rate is 25 percent, and the project discount rate is 10 percent. The device has an estimated Year 5 salvage value of $130,000. What level of pretax cost savings do we require for this project to be profitable?
Year Ovo AWN Property Class Three-Year F ive-Year 33.33% 20.00% 44.45 32.00 14.81 19.20 7.41 11.52 11.52 5.76 Seven-Year 14.29% 24.49 17.49 12.49 8.93 8.92 8.93 4.46Step by Step Solution
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