Costs and revenues for the new product

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Reference no: EM13764472

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	$	150,000
Working capital needed	$	64,000
Overhaul of the equipment in two years	$	10,000
Salvage value of the equipment in four years	$	14,000

Annual revenues and costs:
Sales revenues	$	290,000
Variable expenses	$	140,000
Fixed out-of-pocket operating costs	$	74,000

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

Reference no: EM13764472

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