Calculate net present value of this investment opportunity

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Reference no: EM131389802

Assignment

Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product:

Cost of equipment needed

260,000

Working capital needed

87,000

Overhaul of the equipment in two years

10,500

Salvage value of the equipment in four years

13,500

 


Annual revenues and costs:


Sales revenues

430,000

Variable expenses

210,000

Fixed out-of-pocket operating costs

88,000

When the project concludes in four years the working capital will be released for investment elsewhere within the company.

View Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

https://lectures.mhhe.com/connect/007802563x/exhibit_13b-1.jpg
https://lectures.mhhe.com/connect/007802563x/exhibit_13b-2.jpg

Required:

Calculate the net present value of this investment opportunity.

Reference no: EM131389802

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