Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Lukow Products is investigating the purchase of a piece of automated equipment that will save $130,000 each year in direct labor and inventory carrying costs.

Lukow Products is investigating the purchase of a piece of automated equipment that will save $130,000 each year in direct labor and inventory carrying costs. This equipment costs $720,000 and is expected to have a 5-year useful life with no salvage value. The companys 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.

Click here to view Exhibit 8B-1 and Exhibit 8B-2, to determine the appropriate discount factor(s) using table.

Required:

What dollar value per year would these intangible benefits have to have to make the equipment an acceptable investment? (Round discount factor(s) to 3 decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managerial Accounting

Authors: Carl Warren, William B. Tayler

15th edition

1337912026, 978-1337912020

More Books

Students also viewed these Accounting questions