What level of pretax cost savings

Assignment Help Financial Management
Reference no: EM13927710

A proposed cost-saving device has an installed cost of $760,000. 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 $58,000, the marginal tax rate is 35 percent, and the project discount rate is 9 percent. The device has an estimated Year 5 salvage value of $83,000. What level of pretax cost savings do we require for this project to be profitable? MACRS schedule

Reference no: EM13927710

Questions Cloud

Explain how a decrease in setup time can lead : Explain how a decrease in setup time can lead to a decrease in the average amount of inventory a firm holds, and why that would be beneficial.
Calculate required rate of return on constant growth stock : Calculate the maximum price that you would pay for a ‘constant growth’ stock that has the following characteristics: (a) Dividend: $1.50 (will pay), (b) Growth Rate: 5%, and (c) Required Rate of Return: 10%. Calculate the required rate of return on t..
Financing arrangement with slick willy cost : Your business does about $1.5 million in business, with sales equally spread throughout the year. Your average invoice size is about $26,000. You give all of your customers credit terms of Net 30 days, but most of your customers pay on 45 days. Assum..
Calculate the price of no growth stock : Calculate the price of a ‘no growth’ stock using the following characteristics: (a) Dividend: $4.56 and (b) Required Rate: 13%. Calculate the required rate of return on a stock with the following characteristics: (a) Price: $56.05 and (b) Dividend $5..
What level of pretax cost savings : A proposed cost-saving device has an installed cost of $760,000. 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 $58,000, the margi..
Constructing a two stock portfolio based on the information : You are constructing a two stock portfolio based on the information provided below. What dollar amount will you invest in each stock to achieve the desired return goal? Stock X Stock Y Expected Return 14.0% 9.0% Goal Return of Portfolio: 10.00% Dolla..
Locate the two companies along the security market line : Find the betas of Kia Motors and 3M Corporation. Locate the two companies along the security market line (SML). Assume the risk free rate is 2%, and the market return 7%. Label carefully. Then write down the risk premiums of your companies and assess..
Price-earnings ratios-long-term debt from the balance sheet : Find and/or calculate the following items for Kia Motors and 3M Corporation: Price -Earnings (P/E) ratios. Long-term debt from the balance sheet. Long term Debt to Equity (D/E) ratios. P/E denotes price per share/most recent annual earnings per share..
What is the value of safeco stock when the required return : Financial analysts forecast Safeco Corp.’s (SAF) growth rate for the future to be 7 percent. Safeco’s recent dividend was $1.10. What is the value of Safeco stock when the required return is 9 percent?

Reviews

Write a Review

Financial Management Questions & Answers

  How much interest will stone pay over the life of the loan

Stone got a 4% 30- year mortgage for $295,200. His bank sent him a statement to notify him of his new monthly PITI payment, $1809 ( $1409 for principal and interest, $308 for taxes and $92 for homeowner's insurance). How much interest will Stone pay ..

  Prepared to make monthly payments

You’re prepared to make monthly payments of $250, beginning at the end of this month, into an account that pays 10 percent interest compounded monthly. How many payments will you have made when your account balance reaches $65,000?

  What is the average direct labor cost rate

What is the average direct labor cost rate and What is the overhead rate.

  Determine the value of the companys equity

Milano pizza club owns three identical restaurants popular for their specialty pizzas. Each restaurant has a debt equity ratio of 40 percent and makes interest payments of $41,000 at the end of each year. The coast of the firm’s levered equity is 19 ..

  What is the yield to maturity at a current market price

The YAX Corporation's bonds have 6 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9%. What is the yield to maturity at a current market price of $803? What is the yield to ma..

  Rental property that is leased

If you have a rental property that is leased for $1,000 a month for the next 20 years, what could an investor pay for the property if their required rate of return was 11% (assume rent is collected at the end of each month)?

  Compare and contrast the internal rate of return

Compare and contrast the internal rate of return approach to the net present value approach to capital rationing. Which is better? Support your answer with well-reasoned arguments and examples.

  Compute break-even point at the operating profit level

Compute Break-Even Point at the operating profit level: Ensco Lighting Company has fixed costs of $100,000, sells its units for $28 and has variable costs of $15.50 per unit. Compute the breakeven point.

  Explain how managed earnings might threaten credibility

Explain how “managed earnings” might threaten the credibility of the U.S. financial reporting system. But should we abolish managed earnings? Why is it important to manage earnings?

  Mortgage is categorized as loan

Mortgage is categorized as loan between home buyers (borowers) and lenders (banks) directly. Does your categorization of lending decision change when you consider the mortgage that is sold off to investors?

  Book value at the end of year two will be closest

An asset with a first cost of $50,000 is depreciated by the MACRS method over a five-year period. If the asset will have $20,000 salvage value, its book value at the end of year two will be closest to:

  How long will it take him to repay loan to the nearest year

As a student at P.U., Bob Karp borrowed $12,000 in student loans at an annual interest rate of 9%.  If Bob repays $1,500 per year, how long will it take him to repay the loan to the nearest year?

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