Reference no: EM132511000
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 $265,000
Working capital needed $88,000
Overhaul of the equipment in two years $8,000
Salvage value of the equipment in four years $14,000
Annual revenues and costs:
Sales revenues $440,000
Variable expenses $215,000
Fixed out-of-pocket operating costs $89,000
When the project concludes in four years the working capital will be released for investment elsewhere within the company. Use Excel or a financial calculator to solve.
Required:
Question 1: Calculate the net present value of this investment opportunity. (Round to the nearest dollar.)