Problem 11-14A Net Present Value Analysis [LO11-2]

Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The companys discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product:

Cost of equipment needed		$	165,000
Working capital needed		$	67,000
Overhaul of the equipment in two years		$	10,000
Salvage value of the equipment in four years		$	13,000
Annual revenues and costs:
Sales revenues		$	320,000
Variable expenses		$	155,000
Fixed out-of-pocket operating costs		$	77,000

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).)