Problem $10-48$ Calculating Required Savings $($LO$5,8)$

A proposed cost$-$saving device has an installed cost of $$690,000.$ 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 $

b$.$ Suppose the device will be worth $$97,000$ 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

A proposed cost$-$saving device has an installed cost of $$700,000.$ 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 $10\%$ 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

$

b$.$ Suppose the device will be worth $$98,000$ 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

$