Highpoint, Inc

question 47

Multiple Choice

Highpoint, Inc., is considering investing in automated equipment with a ten-year useful life. Managers at Highpoint have estimated the cash flows associated with the tangible costs and benefits of automation, but have been unable to estimate the cash flows associated with the intangible benefits. Using the company's 12% required rate of return, the net present value of the cash flows associated with just the tangible costs and benefits is a negative $282,500. How large would the annual net cash inflows from the intangible benefits have to be to make this a financially acceptable investment? (Ignore income taxes.) Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.

• A) $20,000
• B) $28,250
• C) $35,000
• D) $50,000

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Definitions:

Confined

Being restricted within boundaries or limited in space or freedom, often referring to a physical or metaphorical constraint.

Pressure

The force exerted on the surface of an object per unit area, commonly measured in units like Pascals (Pa).

Diagram

A simplified drawing showing the appearance, structure, or workings of something; a schematic representation.

Artificial Application

The use or implementation of human-made systems or methods to solve problems or perform tasks, often involving technology or synthetic materials.