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Cost of equipment needed . Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues ... Variable expenses Fixed out-of-pocket operating costs $130,000 $60,000 $8,000 $12,000 $250,000 $120,000 $70,000

Cost of equipment needed . Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues ... Variable expenses Fixed out-of-pocket operating costs $130,000 $60,000 $8,000 $12,000 $250,000 $120,000 $70,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Net Present Value Analysis

Oakmont Company has an 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:

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.

Cost of equipment needed . Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues ... Variable expenses Fixed out-of-pocket operating costs $130,000 $60,000 $8,000 $12,000 $250,000 $120,000 $70,000
Transcribed Image Text:Cost of equipment needed . Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues ... Variable expenses Fixed out-of-pocket operating costs $130,000 $60,000 $8,000 $12,000 $250,000 $120,000 $70,000
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