PROBLEM 14-18 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 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 $250,000 $120,000 $70,000 When the project concludes in four years the working capital will be released for investment elsewhere within the company. Required: Calculate the net present value of this investment opportunity.

PROBLEM 14-18 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 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 $250,000 $120,000 $70,000 When the project concludes in four years the working capital will be released for investment elsewhere within the company. Required: Calculate the net present value of this investment opportunity.

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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