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Lukow Products is investigating the purchase of a piece of automated equipment that will save...

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Accounting

Lukow Products is investigating the purchase of a piece of automated equipment that will save $120,000 each year in direct labor and inventory carrying costs. This equipment costs $830,000 and is expected to have a 8-year useful life with no salvage value. The companys required rate of return is 11% on all equipment purchases. Management anticipates that this equipment will provide intangible benefits such as greater flexibility and higher-quality output that will result in additional future cash inflows.

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