Proposed cost-saving device has an installed cost

Assignment Help Financial Management
Reference no: EM13917610

A proposed cost-saving device has an installed cost of $664,000. The device will be used in a five-year project but is classified as three-year MACRS (MACRS Table) property for tax purposes. The required initial net working capital investment is $53,500, the marginal tax rate is 34 percent, and the project discount rate is 13 percent. The device has an estimated Year 5 salvage value of $78,500.

Required:

What level of pretax cost savings do we require for this project to be profitable? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g.,32.16).)

Pretax savings   $   

Reference no: EM13917610

Questions Cloud

Consider the two mutually exclusive projects : Consider the following two mutually exclusive projects: Year Cash Flow (A) Cash Flow (B) 0 –$ 346,000 –$ 48,000 1 49,000 24,400 2 69,000 22,400 3 69,000 19,900 4 444,000 15,000 Which ever project you choose, if any, you require a 16 percent return on..
What is the value of this bond to an investor : A $1,000 bond is issued with a coupon rate of 8 percent and 20 years to maturity five years ago. If this bond pays interest semi-annually, what is the value of this bond (TODAY) to an investor who requires an 8 percent rate of return?
Evaluating project with the cash flows : RAK Corp. is evaluating a project with the following cash flows: Year Cash Flow 0 –$ 28,000 1 10,200 2 12,900 3 14,800 4 11,900 5 – 8,400 The company uses a discount rate of 13 percent and a reinvestment rate of 6 percent on all of its projects.
Calculate the balance in the investments account : Barry, Hank, and Babe form a company named Long Ball Investments, hoping to find that elusive home run stock. A new clothing company by the name of Major League Apparel has caught their eye. Major League Apparel has two classes of stock authorized: C..
Proposed cost-saving device has an installed cost : A proposed cost-saving device has an installed cost of $664,000. The device will be used in a five-year project but is classified as three-year MACRS (MACRS Table) property for tax purposes. What level of pretax cost savings do we require for this pr..
Suppose your required return on project-pretax cost savings : Your firm is contemplating the purchase of a new $642,000 computer-based order entry system. The system will be depreciated straight-line to zero over its six-year life. Suppose your required return on the project is 8 percent and your pretax cost sa..
Investment satisfies normal distribution with expected value : Assume that the annualized growth rate G of your investments satisfies a normal distribution with an expected value of v=7% and a standard deviation = 20%. What is the probability that you will triple your money after 5 years of investing? After 10 y..
Pretax operating costs-system requires initial investment : Kolby’s Korndogs is looking at a new sausage system with an installed cost of $882,000. This cost will be depreciated straight-line to zero over the project’s seven-year life, at the end of which the sausage system can be scrapped for $97,000. The sa..
Company is expecting a growth rate : A company is expecting a growth rate of 14% for the next two years due to a new invention. Thereafter it should level to an 8% growth rate. The last dividend paid was $.65 per share. What price should the stock sell for if investors require 12% retur..

Reviews

Write a Review

Financial Management Questions & Answers

  Using accrual accounting and the preceding values

Accrual income versus cash flow for a period Thomas Book Sales, Inc., supplies textbooks to college and university bookstores. The books are shipped with a proviso that they must be paid for within 30 days but can be returned for a full refund credit..

  Develop a spreadsheet model for a listed australian company

The Assignment for Accounting Modelling ACCT3003. Develop a spreadsheet model for a listed Australian company using advanced MS Excel functions as part of its construction with a written explanation of your financial model and how the output from ..

  Nominal rate-Interest on outstanding balances paid monthly

As a jewelry store manager, you want to offer credit sales to your customers, with interest on outstanding balances paid monthly. However, to finance your working capital, you must borrow funds from your bank at a nominal 6%, monthly compounding.

  The final project for this module is a consultancy report

the final project for this module is a consultancy report to anthonys orchard an expanding apple orchard and

  What is the current value of one share of stock

AC Electric just paid a $2.10 per share annual dividend. The firm pledges to increase its dividend by 2.4 percent for the next 5 years and then maintain a constant 2 percent rate of dividend growth. If the required return is 15 percent, what is the c..

  What is the total capital the company raised

A company has 30K units of bond with a par value of $1,000 per unit. The bond is selling at 100% of par value. What is the market value of debt? What is the total capital the company raised?

  Statements about the payback method

Which of the following statements about the "payback method" is true?

  Coupon bonds on the market with nine years to maturity

Rau Inc. has 6.0 percent coupon bonds on the market with 9 years to maturity. The bonds make semi-annual payments and currently sell for 110 percent of par. What is the YTM?

  What will bling diamonds cash dividend be in seven years

Four years ago, Bling Diamond, Inc., paid a dividend of $1.95 per share. Bling paid a dividend of $2.37 per share yesterday. Dividends will grow over the next five years at the same rate they grew over the last four years. Thereafter, dividends will ..

  What is the three-year forward price

The spot price of an investment asset is $30 and the risk-free rate for all maturities is 10% with continuous compounding. The asset provides an income of $2 at the end of the first year and at the end of the second year. What is the three-year forwa..

  What rate of interest per annum did you earn

Two years ago, you invested $2,500. Today it is worth $2,809. What rate of interest per annum did you earn? Twenty years ago, your mother invested $15,000. Today, that investment is worth $76,681. What is the average annual rate of return she earned ..

  How much must you invest today

Suppose you are committed to owning a $195,000 Ferrari. If you believe your mutual fund can achieve a 13 percent annual rate of return and you want to buy the car in 10 years on the day you turn 30, how much must you invest today?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd