Calculating Required Savings A proposed cost-saving device has an installed cost of $540,000. 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 $45,000, the marginal tax rate is 35 percent, and the project discount rate is 12 percent. The device has an estimated year 5 salvage value of $50,000. What level of pretax cost savings do we require for this project to be profitable?
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