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The management of Byrge Corporation is investigating buying a small used aircraft to use in making...

The management of Byrge Corporation is investigating buying a small used aircraft to use in making airborne inspections of its above-ground pipelines. The aircraft would have a useful life of 4 years. The company uses a discount rate of 10% in its capital budgeting. The net present value of the investment, excluding the intangible benefits, is −$316,880. (Ignore income taxes.)

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided.

How large would the annual intangible benefit have to be to make the investment in the aircraft financially attractive? (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

A) $316,880

B) $31,688

C) $79,220

D) $99,962

Business   Accounting   
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Answer #1
Minimum annual cash flows from the intangible assets :
                =Negative NPV / Discount factor
Discount factor = PVAF (10%, 4 years)
Year Present value
1 0.90909
2 0.82645
3 0.75131
4 0.68301
Present value of annuity 3.1699
Therefore , = 316880/3.16987 99968.45 Approximation
Option D is correct.
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