Contemporary Engineering Economics 6th Edition by Chan Park

Exercise 59

Larson Manufacturing is considering purchasing a new injection-molding machine for $250,000 to expand its production capacity. It will cost an additional $20,000 to do the site preparation. With the new injection-molding machine installed, Larson Manufacturing expects to increase its revenue by $90,000. The machine will be used for five years, with an expected salvage value of $75,000. At an interest rate of 12%, would the purchase of the injection-molding machine be justified