Calculate net present value of this investment opportunity

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Question - Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 16% After careful study, Oakmont estimated the following costs and revenues for the new product:

Cost of equipment needed $250,000

Working capital needed $82,000

Overhaul of the equipment in year two $8,000

Salvage value of the equipment in four years $11,000

Annual revenues and costs:

Sales revenues $380,000

Variable expenses $185,000

Fixed out-of-pocket operating costs $83,000

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

Required - Calculate the net present value of this investment opportunity.

Reference no: EM133140545

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