Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 16% and it 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 $ 150,000 $ 64,000 $ 10,000 $ 14,000 $ 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. Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using tables.
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 16% and it 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 $ 150,000 $ 64,000 $ 10,000 $ 14,000 $ 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. Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using tables.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is
16% and it 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
$ 150,000
$ 64,000
$ 10,000
$ 14,000
$ 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.
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.
Note: Round your final answer to the nearest whole dollar amount.
Net present value
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