### Investment Analysis for Injection-Molding MachineLarson Manufacturing is considering purchasing a new injection-molding machine for $370,000 to expand its production capacity. The initial setup will also require an additional $15,000 for site preparation. The new injection-molding machine is projected to increase the company’s revenue by $83,000 per year. The machine has an expected lifespan of six years with a salvage value of $60,000. Given an interest rate of 12%, we need to determine if the purchase of this injection-molding machine is justified.#### Financial Factors and CalculationsTo evaluate this decision, we utilize various financial factors:1. **Compound Amount Factor $(F/P, i, N)$**2. **Present Worth Factor $(P/F, i, N)$**3. **Sinking Fund Factor $(A/F, i, N)$**4. **Present Worth Factor $(P/A, i, N)$**5. **Capital Recovery Factor $(A/P, i, N)$**These factors are tabulated below for an interest rate of 12%, up to 10 years.#### Financial Factor Table| N | Single Payment | Equal Payment Series ||:---:|--------------------------------------------|----------------------------------------------|| | Compound Amount Factor (F/P, i, N) | Present Worth Factor (P/F, i, N) | Compound Amount Factor (F/A, i, N) | Sinking Fund Factor (A/F, i, N) | Present Worth Factor (P/A, i, N) | Capital Recovery Factor (A/P, i, N) ||:--:|:------------------------------------------:|:--------------------------------------------:|:------------------------------------------:|:------------------------------------------:|:------------------------------------------:|:------------------------------------------:|| 1 | 1.1200 | 0.8929 | 1.0000 | 1.0000 | 0.8929 | 1.1200 || 2 | 1.2544 | 0.7972 | 2.1200 | 0.4717 | 1.6901 | 0.5917 ||

Cost = 370,000 installation cost = 15,000 Revenue = 83,000 Salvage Value = 60,000 r = 12%

Larson Manufacturing is considering purchasing a new injection-molding machine for $370,000 to expand its production capacity. It will cost an additional $15,000 to do the site preparation. With the new injection-molding machine installed, Larson Manufacturing expects to increase its revenue by $83,000 per year. The machine will be used for six years, with an expected salvage value of $60,000. At an interest rate of 12%, would the purchase of the injection-molding machine be justified? Equal Payment Series Single Payment Compound Present Amount Sinking Present Worth Compound Amount Factor Fund Worth Capital Recovery Factor Factor Factor Factor Factor (F/P, i, N) (P/F, i, N) (F/A, i, N) (A/F, i, N) (P/A, i, N) (A/P, i, N) 1.1200 0.8929 1.0000 1.0000 0.8929 1.1200 1.2544 0.7972 2.1200 0.4717 1.6901 0.5917 1.4049 0.7118 3.3744 0.2963 2.4018 0.4163 NI23

Larson Manufacturing is considering purchasing a new injection-molding machine for $370,000 to expand its production capacity. It will cost an additional $15,000 to do the site preparation. With the new injection-molding machine installed, Larson Manufacturing expects to increase its revenue by $83,000 per year. The machine will be used for six years, with an expected salvage value of $60,000. At an interest rate of 12%, would the purchase of the injection-molding machine be justified? Equal Payment Series Single Payment Compound Present Amount Sinking Present Worth Compound Amount Factor Fund Worth Capital Recovery Factor Factor Factor Factor Factor (F/P, i, N) (P/F, i, N) (F/A, i, N) (A/F, i, N) (P/A, i, N) (A/P, i, N) 1.1200 0.8929 1.0000 1.0000 0.8929 1.1200 1.2544 0.7972 2.1200 0.4717 1.6901 0.5917 1.4049 0.7118 3.3744 0.2963 2.4018 0.4163 NI23

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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