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Lukow Products is investigating the purchase of a piece of automated equipment that will save $150,000 each year in direct labor and inventory carrying costs.

Lukow Products is investigating the purchase of a piece of automated equipment that will save $150,000 each year in direct labor and inventory carrying costs. This equipment costs $860,000 and is expected to have a 6-year useful life with no salvage value. The companys required rate of return is 14% 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.

What dollar value per year would these intangible benefits have to have to make the equipment an acceptable investment?

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