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30 March, 11:27

Larson Manufacturing is considering purchasing a new injection-molding machine for $360 comma 000360,000 to expand its production capacity. It will cost an additional $20 comma 00020,000 to do the site preparation. With the new injection-molding machine installed, Larson Manufacturing expects to increase its revenue by $86 comma 00086,000 per year. The machine will be used for fivefive years, with an expected salvage value of $73 comma 00073,000. At an interest rate of 1414 %, would the purchase of the injection-molding machine be justified?

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  1. 30 March, 12:00
    0
    If I bougth the Machine at 14% interest.

    This purchase is not justified

    Depreciation expenses and credit interest are greater than the income generated

    Explanation:

    Machine 360000

    Adittional cost 20000

    Final Cost 380000

    Salvage Value 73000

    Machine value for depreciation 307000

    year 1 307000 61400 245600

    year 2 245600 61400 184200

    year 3 184200 61400 122800

    year 4 122800 61400 61400

    year 5 61400 61400 0

    Period Payment Capital Interest Loan

    360000

    1 104.862 54.462 50.400 305.538

    2 104.862 62.087 42.775 243.451

    3 104.862 70.779 34.083 172.672

    4 104.862 80.688 24.174 91.984

    5 104.862 91.984 12.878 0

    Depreciation 307000

    Interes 164.310

    Expenses 471.310

    Revenue 430.000
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