(J) Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is18%. After careful study, Oakmont estimated the following costs and revenues for the new product:Cost of equipment neededWorking capital needed.Overhaul of the equipment in two yearsSalvage value of the equipment in four yearsAnnual revenues and costs:Sales revenues$ 270,000$ 90,000$ 9,000$ 14,500$ 450,000$ 220,000$ 90,000Variable expensesFixed out-of-pocket operating costsWhen the project concludes in four years the working capital will be released for investment elsewhere within the company.Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.Net present valueRequired:Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar amount.)

A monetary measure referred to as Net Present Value (NPV) is used to assess a venture's or…

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 Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years. Annual revenues and costs: Sales revenues $ 270,000 $ 90,000 $ 9,000 $ 14,500 $ 450,000 Variable expenses $ 220,000 $ 90,000 Fixed out-of-pocket operating costs When the project concludes in four years the working capital will be released for investment elsewhere within the company. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar amount.) Net present value

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 Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years. Annual revenues and costs: Sales revenues $ 270,000 $ 90,000 $ 9,000 $ 14,500 $ 450,000 Variable expenses $ 220,000 $ 90,000 Fixed out-of-pocket operating costs When the project concludes in four years the working capital will be released for investment elsewhere within the company. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar amount.) Net present value

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 19P

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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: Cost of equipment needed Working capital needed i Overhaul of the equipment in two years Salvage value of the equipment in four years: Annual revenues and costs: Sales revenues $ 130,000 $ 60,000 $ 8,000 $ 12,000 $ 250,000 $ 120,000 $ 70,000 Variable expenses Fixed out-of-pocket operating costs When the project concludes in four years the working capital will be released for investment elsewhere within the company. Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using tables. Net present value Required: Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar amount.)
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: 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 $ 145,000 $ 63,000 $ 9,500 $ 13,500 $ 280,000 $ 135,000 Variable expenses Fixed out-of-pocket operating costs $ 73,000 When the project concludes in four years the working capital will be released for investment elsewhere within the company. Click here to view Exhibit 128-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. Required: Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar amount.) Net present value
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product: 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 $ 275,000 $ 86,000 $10,000 $ 13,000 $ 420,000 Variable expenses $ 205,000 Fixed out-of-pocket operating costs $ 87,000 When the project concludes in four years the working capital will be released for investment elsewhere within the company. Click here to view Exhibit 148-1 and Exhibit 148-2. to determine the appropriate discount factor(s) using tables. Required: Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar amount.)
D