1. A proposed cost-saving project requires a device with an installed cost of $540,000. The project...

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1. A proposed cost-saving project requires a device withan installed cost of $540,000. The project will last for fiveyears. The device has a CCA rate of 20%. The required initial networking capital investment is $20,000, the marginal tax rate is37%, and the required return on the project is 11%. The device hasan estimated salvage value of $95,000 at the end of Year 5, and thenet working capital investment will also be recovered at the end ofYear 5. What level of pre-tax cost savings do we require for thisproject to be profitable?

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The cash flows for 5 years are as below Depreciation in each year installed cost cumulativedepreciation 20OCF income after tax See Answer

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1. A proposed cost-saving project requires a device withan installed cost of $540,000. The project will last for fiveyears. The device has a CCA rate of 20%. The required initial networking capital investment is $20,000, the marginal tax rate is37%, and the required return on the project is 11%. The device hasan estimated salvage value of $95,000 at the end of Year 5, and thenet working capital investment will also be recovered at the end ofYear 5. What level of pre-tax cost savings do we require for thisproject to be profitable?