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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 4 years. The equipment required for the project will be depreciated on a straight-line basis and has no salvage value. The required return for projects of this type is 12 percent and the company has a 24 percent tax rate. Market size Pessimistic 131,000 Expected 141,000 Optimistic 153,000 Market share 20% 24% 26% Selling price $141 $146 $150 Variable costs per $94 $ 90 $87 unit Fixed costs per year $ 966,000 Initial investment $ 1,318,000 $ 911,000 $1,168,000 $881,000 $1,148,000 Calculate the NPV for each case for this project. Assume a negative taxable income generates a tax credit. (A negative amount 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

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 4 years. The equipment required for the project will be depreciated on a straight-line basis and has no salvage value. The required return for projects of this type is 12 percent and the company has a 24 percent tax rate. Market size Pessimistic 131,000 Expected 141,000 Optimistic 153,000 Market share 20% 24% 26% Selling price $141 $146 $150 Variable costs per $94 $ 90 $87 unit Fixed costs per year $ 966,000 Initial investment $ 1,318,000 $ 911,000 $1,168,000 $881,000 $1,148,000 Calculate the NPV for each case for this project. Assume a negative taxable income generates a tax credit. (A negative amount 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

Essentials Of Investments
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
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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 4 years. The equipment required for the project will be depreciated on a straight-line basis and has no salvage value. The required return for projects of this type is 12 percent and the company has a 24 percent tax rate. Market size Pessimistic 131,000 Expected 141,000 Optimistic 153,000 Market share 20% 24% 26% Selling price $141 $146 $150 Variable costs per $94 $ 90 $87 unit Fixed costs per year $ 966,000 Initial investment $ 1,318,000 $ 911,000 $1,168,000 $881,000 $1,148,000 Calculate the NPV for each case for this project. Assume a negative taxable income generates a tax credit. (A negative amount 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
Transcribed Image Text: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 4 years. The equipment required for the project will be depreciated on a straight-line basis and has no salvage value. The required return for projects of this type is 12 percent and the company has a 24 percent tax rate. Market size Pessimistic 131,000 Expected 141,000 Optimistic 153,000 Market share 20% 24% 26% Selling price $141 $146 $150 Variable costs per $94 $ 90 $87 unit Fixed costs per year $ 966,000 Initial investment $ 1,318,000 $ 911,000 $1,168,000 $881,000 $1,148,000 Calculate the NPV for each case for this project. Assume a negative taxable income generates a tax credit. (A negative amount 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
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