Oakmont Compa 18%. After careful study, ny has an opportunity to manufacture and

Question

Oakmont Compa 18%. After careful study, ny has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 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 Variable expenses Pixed out-of-pocket operating costs 370,000 s 180,000 82,000 When the project concludes in four years the working capital will be released for investment elsewhere within the company Click here to view Exhilbit 13B.1 and Exhibit 138.2, to determine the appropriate discount factorís) using tables. Required Calculate the net present value of this investment opportunity

Explanation / Answer

Year-0 Year-1 Year-2 Year-3 Year-4 Initial Investment -220,000 Working capital required -81000 Annual revenues 370000 370000 370000 370000 Total annual cost -262000 -262000 -262000 -262000 Overhual expense -7500 Salavge value 10500 Working capital release 81000 Nnet cash flows -301000 108,000 100500 108,000 199,500 PVF @ 18% 1 0.847458 0.718184 0.608631 0.515789 Present value of cash flows -301000 91525.42 72177.54 65732.13 102899.9 Net present value 31335

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.