Union Bay Plastics is investigating the purchase of automated equipment that would save $100,000 each year in direct labor and inventory carrying costs. This equipment costs $750,000 and is expected to have a 10-year useful lift with no salvage value. The company's required rate of return is 15% 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.
Required:
(Ignore income taxes)
What dollar value per year would the intangible benefits have to have in order to make the equipment an acceptable investment?