Larson manufacturing is considering purchasing a new injection-molding machine for $360 comma 000360,000 to expand its production capacity. it will cost an additional $20 comma 00020,000 to do the site preparation. with the new injection-molding machine installed, larson manufacturing expects to increase its revenue by $86 comma 00086,000 per year. the machine will be used for fivefive years, with an expected salvage value of $73 comma 00073,000. at an interest rate of 1414%, would the purchase of the injection-molding machine be justified?

If I bougth the Machine at 14% interest.

This purchase is not justified

Depreciation expenses and credit interest are greater than the income generated

Explanation:

Machine360000    

Adittional cost20000    

Final Cost380000    

Salvage Value73000    

Machine value for depreciation307000    

year 130700061400245600  

year 224560061400184200  

year 318420061400122800  

year 41228006140061400  

year 561400614000  

PeriodPaymentCapitalInterestLoan

   360000

1104.86254.46250.400305.538

2104.86262.08742.775243.451

3104.86270.77934.083172.672

4104.86280.68824.17491.984

5104.86291.98412.8780

Depreciation307000    

Interes        164.310    

Expenses471.310    

Revenue       430.000    

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

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