What must the pre-tax cost savings be for us to favour the investment? We require an 12% return int This one is a variation on the problem of setting a bid price) (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response) Cost savings $171202 92 O Suppose the device will be worth $77.000 in salvage (before taxes. How does this change your answer? (Do not round wour intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response) Cost savings $1647981 O

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...
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A proposed cost-saving device has an installed cost of $530,000. It is in Class 8 (CCA rate-20%) for CCA purposes. It will
actually function for five years, at which time it will have no value. There are no working capital consequences from the
investment, and the tax rate is 35%
a What must the pre-tax cost savings be for us to favour the investment? We require an 12% return (Hint This one is a
variation on the problem of setting a bid price) (Do not round your intermediate calculations. Round the final answer to 2
decimal places. Omit $ sign in your response)
Cost savings $ 171202.92
b. Suppose the device will be worth $77,000 in salvage (before taxes) How does this change your answer? (Do not round
your intermediate calculations, Round the final answer to 2 decimal places. Omit $ sign in your response)
Cost savings $1647981
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Transcribed Image Text:A proposed cost-saving device has an installed cost of $530,000. It is in Class 8 (CCA rate-20%) for CCA purposes. It will actually function for five years, at which time it will have no value. There are no working capital consequences from the investment, and the tax rate is 35% a What must the pre-tax cost savings be for us to favour the investment? We require an 12% return (Hint This one is a variation on the problem of setting a bid price) (Do not round your intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response) Cost savings $ 171202.92 b. Suppose the device will be worth $77,000 in salvage (before taxes) How does this change your answer? (Do not round your intermediate calculations, Round the final answer to 2 decimal places. Omit $ sign in your response) Cost savings $1647981 < Prev 7 of 9 Next >
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