Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period.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

Salvage value 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:Using Excel (this will save you time and effort) answer the following:

(a)Oakmont's cost of capital is 15%, and management does not feel it should have any adjustment for risk, compute the NPV.

(b)Same situation as (a), but management does feel this project does possess a greater than average risk, so 19% should be the required rate of return.Compute the NPV.

(c)Compute the IRR of this investment.