Hit or Miss Sports is introducing a new product this year. If its see-at night soccer balls are a hit, the firm expects to be able to sell 50,000 units a year at a price of $60 each. If the new product is a bust, only 30,000 units can be sold at a price of $55. The variable cost of each ball is $30, and fixed costs are zero. The cost of the manufacturing equipment is $6 million, and the project life is estimated at 10 years. The firm will use straight-line depreciation over the 10-year life of the project. The firm's tax rate is 35%, and the discount rate is 12%.

Now suppose that Hit or Miss Sports can expand production if the project is successful. By paying its workers overtime, it can increase production by 25,000 units; the variable cost of each ball will be higher, however, equal to $35 per unit. By how much does this option to expand production increase the NPV of the project?

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cted sales 50,000.00 units Seling price Pessimistic sales Pessimistic selling price Increased production Increased Variable cost Fixed cost Cost ofe Proiect life Tax rate Discount rate 60.00 per unit 30,000.00 units 55.00 per unit 25.000.00 units 35.00 per unit 0.00 S 6,000,000.00 10.00 years 35.00% 12.00%