Lukow Products is investigating the purchase of automated equipment that will save $110,000 each year in...

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Lukow Products is investigating the purchase of automated equipment that will save $110,000 each year in direct labor and inventory carrying costs. This equipment costs $700,000 and is expected to have a 6-year useful life with no salvage value. The company's required rate of return is 8% on all equipment purchases. Management expects this equipment to provide intangible benefits such as greater flexibility and higher-quality output that will increase future cash inflows. Click here to view Exhibit 14B-1 and Exhibit 14B-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? Note: 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 $700,000 investment? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. 1. Net present value 2. Minimum dollar value Lukow Products is investigating the purchase of automated equipment that will save $110,000 each year in direct labor and inventory carrying costs. This equipment costs $700,000 and is expected to have a 6-year useful life with no salvage value. The company's required rate of return is 8% on all equipment purchases. Management expects this equipment to provide intangible benefits such as greater flexibility and higher-quality output that will increase future cash inflows. Click here to view Exhibit 14B-1 and Exhibit 14B-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? Note: 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 $700,000 investment? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. 1. Net present value 2. Minimum dollar value

Answer rating: 100% (QA)

1 Net present value Given information Annual savings in direct labor and inventory carrying costs 11... View the full answer