Larson Manufacturing is considering purchasing a new injection-molding machine f

Question

Larson Manufacturing is considering purchasing a new injection-molding machine for $200,000 to expand its production capacity. It will cost an additional $25,000 to do the site preparation. With the new injection-molding machine installed, Larson Manufacturing expects to increase its revenue by $92,000 per year. The machine will be used for seven years, with an expected salvage value of S65,000. At an interest rate of 15% would the purchase of the in ection-molding machine be justified? Click the icon to view the interest factors for discrete compounding when 1-15% per year. The present worth of the project is . Round to the nearest dollar.)

Explanation / Answer

PW = 182195
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A B C D E F G H Year 0 1 2 3 4 5 6 7 1 Machine Cost -200000 2 Additional cost onsite preparation -25000 3 Increase in Revenue 92000 92000 92000 92000 92000 92000 92000 4 Salvage Value 65000 5 After Cost Value -225000 92000 92000 92000 92000 92000 92000 157000 6 Discount rate 15% NPV 182195 NPV(A6,B5:H5)+A5

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