Problem 14-18 (Algo) Net Present Value Analysis [LO14-2] Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 14% 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 $ 140,000 $ 62,000 $ 9,000 $ 13,000 $ 270,000 $ 130,000 $ 72,000 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 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. Note: Round your final answer to the nearest whole dollar amount. Net present value
Problem 14-18 (Algo) Net Present Value Analysis [LO14-2] Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 14% 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 $ 140,000 $ 62,000 $ 9,000 $ 13,000 $ 270,000 $ 130,000 $ 72,000 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 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. Note: Round your final answer to the nearest whole dollar amount. Net present value
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
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![Problem 14-18 (Algo) Net Present Value Analysis [LO14-2]
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is
14% 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
$ 140,000
$ 62,000
$ 9,000
$ 13,000
$ 270,000
Variable expenses
$ 130,000
Fixed out-of-pocket operating costs
$ 72,000
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.
Note: Round your final answer to the nearest whole dollar amount.
Net present value](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff835685d-52c4-47c1-82ee-180509f73d49%2Ffea29bf9-fc76-4b40-a3f6-14e2a3234ca8%2Fprh69e7_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Problem 14-18 (Algo) Net Present Value Analysis [LO14-2]
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is
14% 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
$ 140,000
$ 62,000
$ 9,000
$ 13,000
$ 270,000
Variable expenses
$ 130,000
Fixed out-of-pocket operating costs
$ 72,000
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.
Note: Round your final answer to the nearest whole dollar amount.
Net present value
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