The company has estimated the information in the following table about the market for a racket with the new material.
(Scenario Analysis I) You are the financial analyst for a tennis racket manufacturer. The company is considering
using a graphitelike material in its tennis rackets.
(Scenario Analysis I) You are the financial analyst for a tennis racket manufacturer. The company is considering
using a graphitelike material in its tennis rackets. The company has estimated the information in the following table about the market for a racket with the new material. The company expects to sell the racket for six years. The equipment required for the project has no salvage value. The required return for projects of this type is 13 percent, and the company has a 40 percent tax rate. Should you recommend the project?
| Pessimistic | Expected | Optimistic | |
| Market size | 120,000 | 135,000 | 150,000 |
| Market share | 20 | 23 | 25 |
| Selling Price | $147 | $153 | $158 |
| Variable cost per unit | $104 | $99 | $98 |
| Fixed cost per year | $965,000 | $920,000 | $890,00 |
The company expects to sell the racket for six years. The equipment required for the project has no salvage value. The required return for projects of this type is 13 percent, and the company has a 40 percent tax rate. Should you recommend the project?
| Pessimistic | Expected | Optimistic | |
| Market size | 120,000 | 135,000 | 150,000 |
| Market share | 20 | 23 | 25 |
| Selling Price | $147 | $153 | $158 |
| Variable cost per unit | $104 | $99 | $98 |
| Fixed cost per year | $965,000 | $920,000 | $890,00 |
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