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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The companyA????1s discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product:
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| Â | Â | Â | Â |
| Â Â Cost of equipment needed | Â | $ | 130,000 |
| Â Â Working capital needed | Â | $ | 60,000 |
| Â Â Overhaul of the equipment in two years | Â | $ | 8,000 |
| Â Â Salvage value of the equipment in four years | Â | $ | 12,000 |
| Â | Â | Â | Â |
| Â Â Annual revenues and costs: | Â | Â | Â |
| Â Â Sales revenues | Â | $ | 250,000 |
| Â Â Variable expenses | Â | $ | 120,000 |
| Â Â Fixed out-of-pocket operating costs | Â | $ | 70,000 |
| Â | |||
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|
When the project concludes in four years the working capital will be released for investment elsewhere within the company. |
| Â |
|
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.) |
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