Question

A proposed cost-saving device has an installed cost of $705,000. 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 $115,000, the marginal tax rate is 22 percent, and the project discount rate is 13 percent. The device has an estimated Year 5 salvage value of $86,000. What level of pretax cost savings do we require for this project to be profitable? MACRS schedule. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) MARCS Year 3 Year 1 33.33% 2 44.45% 3 14.81% 4 7.41% Pretax cost savings: $218,144.55

The answer is correctly solved but how is it set up and done in EXCEL?

Answer 1

Solution:-

The Net Present Value of the Project is seems to be negative hence it should not be accepted.

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