Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The companys discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product:
| Working Capital Needed |
$87,000 |
| Cost of Equipment Needed |
$260,000 |
| Overhaul of the equipment in 2 years |
$10,500 |
| Salvage Value of the equipment in 4 years |
$13,500 |
| Annual Revenues and Costs: |
|
| Sales Revenue |
$430,000 |
| Variable Expenses |
$210,000 |
| Fixed Out of Pocket Operating Costs |
$88,000 |
|
|
When the project concludes in four years the working capital will be released for investment elsewhere within the company. Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.
Required: Calculate the net present value of this investment opportunity. (Round discount factor(s) to 3 decimal places.)