Determine the appropriate discount factor

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Problem - Union Bay Plastics is investigating the purchase of automated equipment that would save $130,000 each year in direct labor and inventory carrying costs. This equipment costs $840,000 and is expected to have a 5-year useful life with no salvage value. The company's required rate of return is 9% 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.)

Use Exhibit 13B-2 to determine the appropriate discount factor(s) using table.

Required: What dollar value per year would the intangible benefits have to have in order to make the equipment an acceptable investment?

Attachment:- Exhibit 13B-2.rar

Reference no: EM131799718

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