ces Problem 14-18 (Algo) Net Present Value Analysis [LO14-2] Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed. Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $ 270,000 $ 85,000 $ 8,000 $ 12,500 $ 410,000 $ 200,000 $ 86,000 When the project concludes in four years the working capital will be released for investment elsewhere within the company. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar amount.) < Prev 4 of 4 Next > ****
ces Problem 14-18 (Algo) Net Present Value Analysis [LO14-2] Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed. Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $ 270,000 $ 85,000 $ 8,000 $ 12,500 $ 410,000 $ 200,000 $ 86,000 When the project concludes in four years the working capital will be released for investment elsewhere within the company. Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. Required: Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar amount.) < Prev 4 of 4 Next > ****
Chapter11: The Cost Of Capital
Section: Chapter Questions
Problem 20PROB
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Problem 14-18 (Algo) Net Present Value Analysis [LO14-2]
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is
18%. After careful study, Oakmont estimated the following costs and revenues for the new product:
Cost of equipment needed
Working capital needed.
Overhaul of the equipment in two years
Salvage value of the equipment in four years
Annual revenues and costs:
Sales revenues
Variable expenses
Fixed out-of-pocket operating costs
$ 270,000
$ 85,000
$ 8,000
$ 12,500
$ 410,000
$ 200,000
$ 86,000
When the project concludes in four years the working capital will be released for investment elsewhere within the company.
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.
Required:
Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar amount.)
< Prev 4 of 4
Next >
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Transcribed Image Text:ces
Problem 14-18 (Algo) Net Present Value Analysis [LO14-2]
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is
18%. After careful study, Oakmont estimated the following costs and revenues for the new product:
Cost of equipment needed
Working capital needed.
Overhaul of the equipment in two years
Salvage value of the equipment in four years
Annual revenues and costs:
Sales revenues
Variable expenses
Fixed out-of-pocket operating costs
$ 270,000
$ 85,000
$ 8,000
$ 12,500
$ 410,000
$ 200,000
$ 86,000
When the project concludes in four years the working capital will be released for investment elsewhere within the company.
Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.
Required:
Calculate the net present value of this investment opportunity. (Round your final answer to the nearest whole dollar amount.)
< Prev 4 of 4
Next >
****
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