What dollar value per year would the intangible benefits

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Question - Uncertain Future Cash Flows

Union Bay Plastics is investigating the purchase of automated equipment that would save $100,000 each year in direct labor and inventory carrying costs. This equipment costs $750,000 and is expected to have a 10-year useful lift with no salvage value. The company's required rate of return is 15% 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.

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

Reference no: EM132103281

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