Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

please show work connect. Cost Accounting: FALL 2017- Saturday 8:30am ris Little

ID: 2585975 • Letter: P

Question

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 Little

Explanation / 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