Reference no: EM132562361
Oakmont Company has the opportunity to manufacture and sell a new product for a four- year period. The company's discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product:
Cost of Equipment needed: $130,000
Working Capital Needed: $60,000
Overhaul of the equipment in two years $8,000
Overhaul of the equipment in four years $12,000
Annual Revenues and Costs:
Sales Revenues: $250,000
Variable Expenses: $120,000
Fixed out of pocket operating costs: $70,000
When the project concludes in four years the working capital will be released for investment elsewhere within the company.
Required:
Question 1: Calculate the net present value of this investment opportunity.
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