(Ignore income taxes in this problem.) The management of Gramby Corporation is investigating the purchase of a new satellite routing system with a useful life of 5 years. The company uses a discount rate of 18% in its capital budgeting. The net present value of the investment, excluding its intangible benefits, is -$245,970.
Required:
How large would the additional cash flow per year from the intangible benefits have to be to make the investment in the automated equipment financially attractive?

Question

Quizplus · Accepted Answer

The Answer of (Ignore income taxes in this problem.) The management of Gramby Corporation is investigating the purchase of a new satellite routing system with a useful life of 5 years. The company uses a discount rate of 18% in its capital budgeting. The net present value of the investment, excluding its intangible benefits, is -$245,970.
Required:
How large would the additional cash flow per year from the intangible benefits have to be to make the investment in the automated equipment financially attractive?

(Ignore Income Taxes in This Problem