Cost of equipment needed . Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues ... Variable expenses Fixed out-of-pocket operating costs $130,000 $60,000 $8,000 $12,000 $250,000 $120,000 $70,000
Cost of equipment needed . Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues ... Variable expenses Fixed out-of-pocket operating costs $130,000 $60,000 $8,000 $12,000 $250,000 $120,000 $70,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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:
When the project concludes in four years the
Required:
Calculate the net present value of this investment opportunity.
Transcribed Image Text:Cost of equipment needed .
Working capital needed
Overhaul of the equipment in two years
Salvage value of the equipment in four years
Annual revenues and costs:
Sales revenues ...
Variable expenses
Fixed out-of-pocket operating costs
$130,000
$60,000
$8,000
$12,000
$250,000
$120,000
$70,000
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