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A proposed cost-saving device has an installed cost of $640,000. 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 $46,000, the marginal tax rate is 30 percent, and the project discount rate is 8 percent. The device has an estimated year 5 salvage value of $71,000. What level of pretax cost savings do we require for this project to be profitable?

year 3 years

1 33.33%

2 44.45%

3 14.81%

4 7.41%

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91549157

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