Dhapa Exercise 14-4 (Algo) Uncertain Future Cash Flows [LO14-4]Lukow Products is investigating the purchase of a piece of automated equipment that will save $110,000 each year in direct labor andinventory carrying costs. This equipment costs $820,000 and is expected to have a 7-year useful life with no salvage value. Thecompany's required rate of return is 7% on all equipment purchases. Management anticipates that this equipment will provideintangible benefits such as greater flexibility and higher-quality output that will result in additional 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? (Enter negative amount with aminus 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 $820,000 investment?(Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)1. Net present value2. Minimum dollar value

Req: 1Annual Saving from purchase of automated equipment$1,50,000Present Value of an ordinary…

Answered: 1. Net present value 2. Minimum dollar…

Business

Economics

1. Net present value 2. Minimum dollar value

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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