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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 16%. After careful study, Oakmont estimated the following costs and revenues for the new product:

 

 

 

Cost of equipment needed

$

170,000

Working capital needed

$

68,000

Overhaul of the equipment in year two

$

12,000

Salvage value of the equipment in four years

$

16,000

 

 

 

Annual revenues and costs:

 

 

Sales revenues

$

330,000

Variable expenses

$

160,000

Fixed out-of-pocket operating costs

$

78,000


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. (Round your final answer to the nearest whole dollar amount.

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