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Oakmont Company has an opportunity to manufacture and sell a new product for a four-year period. The company???s discount rate...

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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 $ 150,000;Working capital needed $ 64,000;Overhaul of the equipment in two years $ 10,000;Salvage value of the equipment in four years $ 14,000;Annual revenues and costs;Sales revenues $ 290,000;Variable expenses $ 140,000;Fixed out-of-pocket operating costs $ 74,000;When the project concludes in four years the working capital will be released for investment elsewhere within the company.

 

Paper#74461 | Written in 18-Jul-2015

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