The management of Londo Corporation is investigating buying a small used aircraf

Question

The management of Londo Corporation is investigating buying a small used aircraft to use in making airborne inspections of its above-ground pipelines. The aircraft would have a useful life of 6 years. The company uses a discount rate of 18% in its capital budgeting. The net present value of the investment, excluding the intangible benefits, is -$475,500. (Ignore income taxes in this problem) Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables. How large would the annual intangible benefit have to be to make the investment in the aircraft financially attractive? (Round discount factor(s) to 3 decimal places and final answer to the nearest dollar amount.) $475,500 $135,935 $79,250 $85,590

Explanation / Answer

Calculation of the Annual Benefit 475500= Annual Benefit( PVAF, 18%, 6 years) 475500= Annual Benefit*3.4979 Annual Benefit 475500/3.4979 Annual Benefit is $ 135935 The correct option is B. $ 135935

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