10 Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is18%. After careful study, Oakmont estimated the following costs and revenues for the new product:Cost of equipment neededWorking capital neededOverhaul of the equipment in year twoSalvage value of the equipment in four years$ 220,000$ 81,0007,500$ 10,500Annual revenues and costs:Sales revenues$ 370,000$ 180,000$ 82,000Variable expensesesFixed out-of-pocket operating costsWhen 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.)Net present value< Prev10 of 11Next >anere to search

Determination of NPV helps the business entity in deciding whether to invest in the proposed project…

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 year two Salvage value of the equipment in four years $ 220,000 $ 81,000 7,500 $ 10,500 Annual revenues and costs: Sales revenues $ 370,000 $ 180, 000 $ 82,000 Variable expenses Fixed out-of-pocket operating costs 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.) Net present value

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 year two Salvage value of the equipment in four years $ 220,000 $ 81,000 7,500 $ 10,500 Annual revenues and costs: Sales revenues $ 370,000 $ 180, 000 $ 82,000 Variable expenses Fixed out-of-pocket operating costs 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.) Net present value

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 19P

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