Exercise $12-4($Algo$)$ Uncertain Future Cash Flows $[$LO$12-4]$

Lukow Products is investigating the purchase of a piece of automated equipment that will save $$120,000$ each year in direct labor and inventory carrying costs. This equipment costs $$710,000$ and is expected to have a $7-$year useful life with no salvage value. The company$$s required rate of return is $9\%$ 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.

Click here to view Exhibit $12$B$-1$ and Exhibit $12$B$-2,$ to determine the appropriate discount factor$($s$)$ using table.

Required:

$1.$ What is the net present value of the piece of equipment before considering its intangible benefits? $($Enter negative amount with a 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$$s intangible benefits to justify the $$710,000$ investment? $($Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.$)$Exercise $12-4($Algo$)$ Uncertain Future Cash Flows $[$LO$12-4]$

Lukow Products is investigating the purchase of a plece of automated equipment that will save $$120,000$ each

year in direct labor and inventory carrying costs. This equipment costs $$710,000$ and is expected to have a $7-$

year useful life with no salvage value. The company's required rate of return is $9\%$ 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.

Click here to vlew Exhibit $12$B$-1$ and Exhibit $12$B$-2,$ to determine the appropriate discount factor$($s$)$ using table.

Required:

What is the net present value of the plece of equipment before considering its intangible benefits? $($Enter

negatlve amount with a minus sign. Round your final answer to the nearest whole dollar amount.$)$

What minimum dollar value per year must be provided by the equipment's intangible benefits to justify the

$$710,000$ investment? $($Do not round intermedlate calculations. Round your answer to the nearest whole

dollar amount.$)$