Check my work 4 Lukow Products is investigating the purchase of a piece of autom

Question

Check my work 4 Lukow Products is investigating the purchase of a piece of automated equipment that will save $120,000 each year in direct labor and inventory carrying costs. This equipment costs $910,000 and is expected to have a 11-year useful life with no salvage value. The company's required rate of return is 10% on all equipment purchases. Management anticipates that this equipment will provide intangible benefits such as greater flexibility and higher-quality output that will result in additional future cash inflows. 10 points Click here to view Exhibit 138-1 and Exhibit 138-2. to determine the appropriate discount factors) using table. eBook Required: Hint Print References 1. What is the net present value of the piece of equipment before considering its intangible benefits? (Enter negative amount witha minus sign. Round your final answer to the nearest whole dollar amount.) 2. What minimum dollar value per year must be provided by the equipment's intangible benefits to justify the $910,000 investment? 1 Net present value 2. Minimum dollar value

Explanation / Answer

1 Net present value = (120000*6.495)-910000= -130600 2 Minimum dollar value= 130600/6.495= $20108 (rounded off)

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---