A proposed cost-saving device has an installed cost of $656,000. The device will be used in a five-year project but is classified as three-year MACRS (MACRS Table) property for tax purposes. The required initial net working capital investment is $49,500, the marginal tax rate is 34 percent, and the project discount rate is 13 percent. The device has an estimated Year 5 salvage value of $74,500.
What level of pretax cost savings do we require for this project to be profitable?