Solution:
Computation of NPV - Oakmont Company | ||||
Particulars | Period | Amount | PV Factor (19%) | Present Value |
Cash outflows: | ||||
Cost of equipment | 0 | $130,000 | 1 | $130,000 |
Working capital | 0 | $60,000 | 1 | $60,000 |
Overhaul of equipment | 2 | $8,000 | 0.70616 | $5,649 |
Present value of cash outflows (A) | $195,649 | |||
Cash Inflows: | ||||
Annual cash inflows | 1-4 | $60,000 | 2.63859 | $158,315 |
Salvage value | 4 | $12,000 | 0.49867 | $5,984 |
Release of working capital | 4 | $60,000 | 0.49867 | $29,920 |
Present value of cash inflow (B) | $194,220 | |||
NPV (B-A) | -$1,430 |
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period....
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...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed.. Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years $130,000 $60,000 $8,000 $12,000 Annual revenues and costs: Sales revenues $250,000 $120,000 $70,000 Variable expenses Fixed out-of-pocket operating costs When the project...
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: $130,000 $60,000 $8,000 $12,000 Cost of equipment needed Working capital needed.... Overhaul of the equipment in two years Salvage value of the equipment in four years Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $250,000 $120,000 $70,000 When the project concludes in four years the working...
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: Cost of equipment needed $ 250,000 Working capital needed $ 82,000 Overhaul of the equipment in two years $ 8,000 Salvage value of the equipment in four years $ 11,000 Annual revenues and costs: Sales revenues $ 380,000 Variable expenses $ 185,000 Fixed out-of-pocket...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed $ 190,000 Working capital needed $ 69,000 Overhaul of the equipment in year two $ 6,000 Salvage value of the equipment in four years $ 16,500 Annual revenues and costs: Sales revenues $ 340,000 Variable expenses $ 165,000 Fixed out-of-pocket...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product: Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 17%. After careful study, Oakmont estimated the following costs and revenues for the new product $ 165,000 $ 67,000 $ 10,000 $ 13,000...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 15%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed $ 145,000 Working capital needed $ 63,000 Overhaul of the equipment in year two $ 9,500 Salvage value of the equipment in four years $ 13,500 Annual revenues and costs: Sales revenues $ 280,000 Variable expenses $ 135,000 Fixed out-of-pocket...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed $ 220,000 Working capital needed $ 81,000 Overhaul of the equipment in year two $ 7,500 Salvage value of the equipment in four years $ 10,500 Annual revenues and costs: Sales revenues $ 370,000 Variable expenses $ 180,000 Fixed out-of-pocket...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company's discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed Working capital needed Overhaul of the equipment in two years Salvage value of the equipment in four years $ 270,000 $ 85,000 $ 8,000 $ 12,500 Annual revenues and costs: Sales revenues Variable expenses Fixed out-of-pocket operating costs $410,000 $...
Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company’s discount rate is 18%. After careful study, Oakmont estimated the following costs and revenues for the new product: Cost of equipment needed $ 270,000 Working capital needed $ 85,000 Overhaul of the equipment in year two $ 8,000 Salvage value of the equipment in four years $ 12,500 Annual revenues and costs: Sales revenues $ 410,000 Variable expenses $ 200,000 Fixed out-of-pocket...