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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:
| Cost of equipment needed | $ | 130,000 | |
| Working capital needed | $ | 60,000 | |
| Overhaul of the equipment in two years | $ | 8,000 | |
| Salvage value of the equipment in four years | $ | 12,000 | |
| Annual revenues and costs: | |||
| Sales revenues | $ | 250,000 | |
| Variable expenses | $ | 120,000 | |
| Fixed out-of-pocket operating costs | $ | 70,000 | |
|
When the project concludes in four years the working capital will be released for investment elsewhere within the company. |
|
Click here to view Exhibit 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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