Exercise 13- 18:

Oakmont Company has the 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

Overhaul 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.

Required:

Calculate the net present value of this investment opportunity.