please show work connect. Cost Accounting: FALL 2017- Saturday 8:30am ris Little
ID: 2585975 • Letter: P
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please show work
connect. Cost Accounting: FALL 2017- Saturday 8:30am ris Little ACCOUNTING 000 peints Lukow Products a mwistigatrg the purchase ot s pece of automated equipstient ths wil sive $100,000 each yene n drect ishot and irvenitory carryng costs T expocted to have a 6-year useful Ife with no salvage value The companys reqared sate of r ntangible benefits such as greater fesbiliy and higher-quality output that w eh in wdiional taide cash iows emis P on al equpment purehases Management nis tha ths elpmet wed prow Required: What dolat vate per yesr woukt these inlangble benefis have to have o make themnt on areapaboa semRound discouint factorfe) to 3 decimsl places.) Annual Valur . Anual vakue · Choose Numerator: Choose Denominator: 11:05 @ Tis LittleExplanation / Answer
For this equipment to be acceptible
The required annual value of both direct and intangible benefits is:
Numerator= cost of equipment= 890000
Denominator= present value annuity factor for 6 years with 9% discount rate= 4.486
Annual value= 890000/4.486= 198395
The above annual value is inclusive of direct benefits as well as intangible benefits.
To calculate only the intangible benefit related numerator and denominator:
Numerator:
=Cost of equipment - present value of direct benefits
present value of direct benefits= 100000*4.486 = 448600
Numerator= 890000-448600= 441400
By doing this effectively, the amount of investment recouped with direct benefits is reduced and the balance 441400 is the present value of cost that need to be compensated with indirect cash flows from intangible benefits.
Hence numerator= 441400
Denominator= 4.486
Annual value= 441400/4.486= 98395
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