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Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The companys discount rate is 16%. After careful study,

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

Cost of equipment needed $ 170,000
Working capital needed $ 68,000
Overhaul of the equipment in two years $ 12,000
Salvage value of the equipment in four years $ 16,000
Annual revenues and costs:
Sales revenues $ 330,000
Variable expenses $ 160,000
Fixed out-of-pocket operating costs $ 78,000

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

Click here to view Exhibit 11B-1 and Exhibit 11B-2, to determine the appropriate discount factor(s) using tables.

Required:

Calculate the net present value of this investment opportunity. (Use the appropriate table to determine the discount factor(s).)

Net present value

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