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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Answer #1


a)				Now	1	2	3	4
	purchase of Equipment			-265,000
	working capital investment			-88,000
	annual net cash receipt				136,000	136,000	136,000	136,000
	overhaul of equipment					-8,000
	working capital released							88,000
	salvage value of equipment							14,000
	total cash flows			-353,000	136000	128000	136000	238000
	discount factor (18%)			1	0.847	0.718	0.609	0.516
	present value			-353000	115192	91904	82824	122808
	net present value			59,728


	(take the discount factor as given in your question to get exact answer)



	Net present value		$59,728





		annaul cash receipts
		sales revenues			440,000
	less:	variable expenses			-215,000
		fixed out of pocket operating			-89,000
		annual cash receipts			136,000

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Answer 2

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