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:
Cost of equipment needed $ 260,000
Working capital needed $ 87,000
Overhaul of the equipment in two years $ 10,500
Salvage value of the equipment in four years $ 13,500
Annual revenues and costs:
Sales revenues $ 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.)