Larson Manufacturing is considering purchasing a new injection-molding machine for $250,000 to expand its production capacity. It

Question:

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 of $75,000. At an interest rate of 12%, would the purchase of the injection-molding machine be justified?
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...