Hanover Industries is investigating purchasing automated equipment that would save $100,000 each year in direct labour and inventory carrying costs. This equipment costs $750,000 and is expected to have a 10-year useful life with no salvage value. The company requires a minimum 15% rate of return on all equipment purchases. This equipment would provide intangible benefits (such as greater flexibility and higher-quality output) that are difficult to estimate and yet are quite significant.
Ignore income taxes. What dollar value per year would the intangible benefits have to be worth to make the equipment an acceptable investment?