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:
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| Cost of equipment needed |
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$ |
160,000 |
| Working capital needed |
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$ |
66,000 |
| Overhaul of the equipment in two years |
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$ |
11,000 |
| Salvage value of the equipment in four years |
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$ |
15,000 |
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| Annual revenues and costs: |
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|
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| Sales revenues |
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$ |
310,000 |
| Variable expenses |
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$ |
150,000 |
| Fixed out-of-pocket operating costs |
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$ |
76,000 |
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When the project concludes in four years the working capital will be released for investment elsewhere within the company.
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| Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. |
| Required: |
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Calculate the net present value of this investment opportunity. (Round discount factor(s) to 3 decimal places.)
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