Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount
Posted: Sun Jul 03, 2022 3:55 pm
Oakmont Company has an opportunity to manufacture and sell a newproduct for a four-year period. The company’s discount rate is 18%.After careful study, Oakmont estimated the following costs andrevenues for the new product:
Cost of equipment needed $ 220,000
Working capital needed $ 81,000
Overhaul of the equipment in year two $ 7,500
Salvage value of the equipment in four years $ 10,500
Annual revenues and costs: Sales revenues $ 370,000
Variable expenses $ 180,000
Fixed out-of-pocket operating costs $ 82,000
When the project concludes in four years the working capitalwill be released for investment elsewhere within the company.Required: Calculate the net present value of this investmentopportunity. (Round your final answer to the nearest whole dollaramount.)
Cost of equipment needed $ 220,000
Working capital needed $ 81,000
Overhaul of the equipment in year two $ 7,500
Salvage value of the equipment in four years $ 10,500
Annual revenues and costs: Sales revenues $ 370,000
Variable expenses $ 180,000
Fixed out-of-pocket operating costs $ 82,000
When the project concludes in four years the working capitalwill be released for investment elsewhere within the company.Required: Calculate the net present value of this investmentopportunity. (Round your final answer to the nearest whole dollaramount.)