You are the financial analyst for a tennis racket manufacturer.
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 and will be depreciated on a straight-line basis. The required return for projects of this type is 13 percent, and the company has a 40 percent tax rate.
| Pessimistic | Expected | Optimistic | |||||||||||
| Market size | 111,000 | 126,000 | 151,000 | ||||||||||
| Market share | 20 | % | 23 | % | 25 | % | |||||||
| Selling price | $ | 156 | $ | 161 | $ | 167 | |||||||
| Variable costs per unit | $ | 110 | $ | 105 | $ | 104 | |||||||
| Fixed costs per year | $ | 971,000 | $ | 926,000 | $ | 896,000 | |||||||
| Initial investment | $ | 1,938,000 | $ | 1,836,000 | $ | 1,734,000 | |||||||
| Calculate the NPV for each case for this project. Assume a negative taxable income generates a tax credit. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) |
| Pessimistic | $ | |
| Expected | $ | |
| Optimistic |
Looking for a Similar Assignment? Order now and Get 10% Discount! Use Coupon Code "Newclient"
