Exercise 14-4 (Algo) Uncertain Future Cash Flows [LO14-4] Lukow Products is investigating the purchase of automated equipment that will save $100,000 each year in direct labor and inventory carrying costs. This equipment costs $890,000 and is expected to have a 6-year useful life with no salvage value. The company's required rate of return is 9% 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 $890,000 investment? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. 1. Net present value 2. Minimum dollar value

Exercise 14-4 (Algo) Uncertain Future Cash Flows [LO14-4] Lukow Products is investigating the purchase of automated equipment that will save $100,000 each year in direct labor and inventory carrying costs. This equipment costs $890,000 and is expected to have a 6-year useful life with no salvage value. The company's required rate of return is 9% 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 $890,000 investment? Note: Do not round intermediate calculations. Round your answer to the nearest whole dollar amount. 1. Net present value 2. Minimum dollar value

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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