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) Oakmonts 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.