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Lukow Products is investigating the purchase of a piece of automated equipment that will save $170,000 each year in direct labor and inventory carrying costs This equipment costs $880000 and is

Lukow Products is investigating the purchase of a piece of automated equipment that will save $170,000 each year in direct labor and inventory carrying costs. This equipment costs $880,000 and is expected to have a 5-year useful life with no salvage value. The company’s 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. Click here to view Exhibit 13B-1 and Exhibit 13B-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? (Use the tables to determine the discount rate.)

Jun 26 2020 View more View Less

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