Union Bay Plastics is investigating the purchase of autm omated equipment that would save $100,000 each year in direct labor and inventory carrying costs. This equipment costs $810,000 and is expected to have a 6-year useful life with no salvage value. The company's required rate of return is 7% 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. (Ignore income taxes.)
Click here to view Exhibit 13B-2, to determine the appropriate discount factor(s) using table.
Required:
What dollar value per year would the intangible benefits have to have in order to make the equipment an acceptable investment? (Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "tiny_mce_markerquot; sign in your response.)