Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 16%. After careful study, Oakmont estimated the following costs and revenues for the new product:

When the project concludes in four years the working capital will be released for investment elsewhere within the company.

To determine the appropriate discount factor(s) using tables. below

Required:

Calculate the net present value of this investment opportunity. (Round discount factor(s) to 3 decimal places.)

 

Cost of equipment needed Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years $ 150,000 $ 64,000 $ 10,000 $ 14,000 Annual revenues and costs: Sales revenues Variable expenses $ 290,000 $ 140,000 $ 74,000 Fixed out-of-pocket operating costs