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.University Of North Carolina At Charlotte Operations And Supply Chain Management Assignment Help - Lukow Products


Question - Lukow Products is investigating the purchase of a piece of automated equipment that will save
$400,000 each year in direct labor and inventory carrying costs. This equipment costs $2,500,000 and
is expected to have a 15-year useful life with no salvage value. The company’s required rate of return
is 20% 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.
Required:
What dollar value per year would these intangible benefits have to have to make the equipment an
acceptable investment?

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