The management of Crosson Corporation is investigating the purchase of a new satellite routing system with a useful life of 9 years. The company uses a discount rate of 17% in its capital budgeting. The net present value of the investment, excluding its intangible benefits, is -$173,055. (Ignore income taxes.)Refer to Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided.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?
What will be an ideal response?
Minimum annual cash flows from the intangible benefits
= Negative net present value to be offset ÷ Present value factor
= $173,055 ÷ 4.451 = $38,880
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