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 year two Salvage value of the equipment in four years Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $ 165,000 $ 67,000 $ 10,000 $ 13,000 $ 320,000 155,000 $ $ 77,000 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 128-2, to determine une appropriate discount factor(s) using tables. (Use the tables to get your discount factors. The linked tables are the same tables as the ones in your course packet. If you calculate discount factors using Excel or a financial calculator, your answer may be different enough due to rounding that the system marks it wrong.) Required: Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar
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 year two Salvage value of the equipment in four years Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $ 165,000 $ 67,000 $ 10,000 $ 13,000 $ 320,000 155,000 $ $ 77,000 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 128-2, to determine une appropriate discount factor(s) using tables. (Use the tables to get your discount factors. The linked tables are the same tables as the ones in your course packet. If you calculate discount factors using Excel or a financial calculator, your answer may be different enough due to rounding that the system marks it wrong.) Required: Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 21P
Related questions
Question
![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 year two
Salvage value of the equipment in four years
Annual revenues and costs:
Sales revenues
Variable expenses
Fixed out-of-pocket operating costs
$ 165,000
$ 67,000
$ 10,000
$ 13,000.
$ 320,000
$
155,000
$ 77,000
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 128-2, to determine the appropriate discount factor(s) using tables. (Use the
tables to get your discount factors. The linked tables are the same tables as the ones in your course packet. If you
calculate discount factors using Excel or a financial calculator, your answer may be different enough due to rounding
that the system marks it wrong.)
Net present value
Required:
Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar
amount.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fff36f8f7-c1af-4d2c-887e-9ba0e314c4fb%2Fa965f760-a98a-450e-bd07-6e23d4236fff%2Fcaoilyg_processed.jpeg&w=3840&q=75)
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 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 year two
Salvage value of the equipment in four years
Annual revenues and costs:
Sales revenues
Variable expenses
Fixed out-of-pocket operating costs
$ 165,000
$ 67,000
$ 10,000
$ 13,000.
$ 320,000
$
155,000
$ 77,000
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 128-2, to determine the appropriate discount factor(s) using tables. (Use the
tables to get your discount factors. The linked tables are the same tables as the ones in your course packet. If you
calculate discount factors using Excel or a financial calculator, your answer may be different enough due to rounding
that the system marks it wrong.)
Net present value
Required:
Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar
amount.)
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