You are the financial analyst for a tennis racket manufacturer. The company isconsidering using a graphitelike material in its tennis rackets. The company hasestimated the information in the following table about the market for a racket with thenew material. The company expects to sell the racket for 6 years. The equipmentrequired for the project will be depreciated on a straight-line basis and has no salvagevalue. The required return for projects of this type is 13 percent and the company has a23 percent tax rate.Market sizeMarket shareSelling priceVariable costs perunitFixed costs per yearInitial investmentPessimistic113,00019%$164$ 106$978,000$ 1,968,000Expected123,00023%$ 169$ 102$ 923,000$1,818,000Optimistic135,00025%$ 173$ 99$ 893,000$ 1,798,000Calculate the NPV for each case for this project. Assume a negative taxable incomegenerates a tax credit. (A negative amount should be indicated by a minus sign. Donot round intermediate calculations and round your answers to 2 decimal places, e.g.,32.16.)

Final Answer:ParticularsPessimisticExpectedOptimisticNet Present Value (NPV)-$8,43,768.27…

Answered: You are the financial analyst for a…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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