Net Present Value Analysis [LO12-2]Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company'sdiscount rate is 13%. After careful study, Oakmont estimated the following costs and revenues for the new product:Cost of equipment neededWorking capital neededOverhaul of the equipment in two yearsSalvage value of the equipment in four yearsAnnual revenues and costs:Sales revenues$ 260,000Variable expenses$ 125,000Fixed out-of-pocket operating costs$ 71,000When the project concludes in four years the working capital will be released for investment elsewhere within the comparClick here to view Exhibit 12B-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 dollaramount.)Net present value$ 135,000$ 61,000$ 7,000$ 11,000< Prev5 of 6 HNext >

Net present value is one of the important technique used in capital budgeting. This uses present…

Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 13%. 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 $ 135,000 $ 61,000 $ 7,000 $ 11,000 $ 260,000 $ 125,000 $ 71,000 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 comp Click here to view Exhibit 12B-1 and Exhibit 12B-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 13%. 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 $ 135,000 $ 61,000 $ 7,000 $ 11,000 $ 260,000 $ 125,000 $ 71,000 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 comp Click here to view Exhibit 12B-1 and Exhibit 12B-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.)

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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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 Variable expenses Fixed out-of-pocket operating costs $ 130,000 $ 60,000 8,000 $ 12,000 $ When the project concludes in four years the working capital will be released for investment elsewhere within the company. $250,000 $ 120,000 $ 70,000 Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. $ Required: Calculate the net present value of this investment opportunity. (Round discount factor(s) to 3 decimal places.) Net present value 3