Larson manufacturing is considering purchasing a new injectionmolding 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?

The project is viable as the net present value is positive. The project yields even more than the cost of capital

Explanation:

for the cost of the mahcine we must include all the cost for leave it ready to use.

So, we add the purchase and installation cost:

250,000 + 20,000 = 270,000 investment cost.

revenue of 90,000

time of 5 years

and salvage value of 75,000 at the end of useful life.

Present value of the salvage value: present value of a lump sum

Salvage 75,000.00

time   5.00

rate  0.12

PV   42,557.01

Present value of revenues: will be considered ordinary annuity

C90,000

time5

rate0.15

PV$324,429.86

Net present value:

present value of inflow less present value of outflow:

324,429.86  +  42,557.01 -270,000 = 96.986,87‬

answer; no individual buyer or seller has any significant impact on the market price;

answer///the factor market;