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Homework answers / question archive / Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period

Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period

Accounting

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$190,000 Working capital needed$69,000 Overhaul of the equipment in year two$6,000 Salvage value of the equipment in four years$16,500   Annual revenues and costs:  Sales revenues$340,000 Variable expenses$165,000 Fixed out-of-pocket operating costs$79,000
 
When the project concludes in four years the working capital will be released for investment elsewhere within the company.

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