Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Lukow Products is investigating the purchase of a piece of automated equipment that will save $400,000 each year in direct labor and inventory carrying costs.
Lukow Products is investigating the purchase of a piece of automated equipment that will save $400,000 each year in direct labor and inventory carrying costs. This equipment costs $2.500000 and is expected to have a 15-year useful life with no salvage value. The company's required rate of return is 20% on all equipment purchases. Management anticipates thatthis 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 12B.1 and Exhibit 128 2 to determine the appropriate discount factorts) using tables. Required 1. What is the net present value of the piece of equipment before considering its intangible benefits? (Enter negative amounts with a minus sign.) 2 What minimum dollar value per year must be provided by the equipments intangible benefits to justify the $2.500.000 investment? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) 1Not present value 2 Minimum dollar value
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started