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

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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

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Answer 1

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Particulars	Year 0	Year 1	Year 2	Year 3	Year 4
Initial investment	-$130000
Working capital needed	-$60000

Sales		$250000	$250000	$250000	$250000
Less: Variable expenses		$120000	$120000	$120000	$120000
Less: Fixed cost		$70000	$70000	$70000	$70000
Less: Overhaul cost			$8000
Operating cash inflow		$60000	$52000	$60000	$60000
Add: Working capital					$60000
Add: Salvage value					$12000
Total cash inflows		$60000	$52000	$60000	$132000
PV factor at 15%		0.86957	0.75614	0.65752	0.57175
Pv of cash inflows		$52174	$39319	$39451	$75471
Total PV					$206415
Less: Cash outflows					$190000
NPV					$16415

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Answer 2

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