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Oakmont Company has an opportunity to manufacture and sell a new...

Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product:

  

       
  Cost of equipment needed   $ 130,000  
  Working capital needed   $ 60,000  
  Overhaul of the equipment in two years   $ 8,000  
  Salvage value of the equipment in four years   $ 12,000  
       
  Annual revenues and costs:      
  Sales revenues   $ 250,000  
  Variable expenses   $ 120,000  
  Fixed out-of-pocket operating costs   $ 70,000  

 

  

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.)

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