akmont Company has an opportunity to manufacture and sell a new product for a four-year period. The com ate is 16%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed $ 170,000 $ 68,000 Overhaul of the equipment in two years $ 12,000 $ 16,000 Salvage value of the equipment in four years Annual revenues and costs: Sales revenues $ 330,000 Variable expenses $ 160,000 $ 78,000 Fixed out-of-pocket operating costs When the project concludes in four years the working capital will be released for investment elsewhere within lick here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
akmont Company has an opportunity to manufacture and sell a new product for a four-year period. The com ate is 16%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed $ 170,000 $ 68,000 Overhaul of the equipment in two years $ 12,000 $ 16,000 Salvage value of the equipment in four years Annual revenues and costs: Sales revenues $ 330,000 Variable expenses $ 160,000 $ 78,000 Fixed out-of-pocket operating costs When the project concludes in four years the working capital will be released for investment elsewhere within lick here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 19P
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