4) You are the financial analyst for a tennis racquet manufacturer. The company is considering using a graphite-like material in its tennis racquets. The company has estimated the information in the following table about the market for a racquet with the new material. The company expects to sell the racquet for six years. The equipment required for the project has no salvage value. The equipment will be depreciated straight-line to zero over the project's life. The required return for projects of this type is 13 percent, and the company has a 40 percent tax rate. Assume the company has other profitable ongoing operations that are sufficient to cover any losses. (Assume that if your taxable income is negative, you get a tax credit) Expected Optimistic Pessimistic 130,000 Market size 150,000 165,000 Market share 21% 25% 28% Selling price $ 140 $ 145 150 Variable costs per unit $ 102 $ 98 94 $ 1,015,000 $ 950,000 900,000 Fixed costs per year Initial investment $ 2,200,000 $ 2,100,000 $ 2,000,000 4) You are the financial analyst for a tennis racquet manufacturer. The company is considering using a graphite-like material in its tennis racquets. The company has estimated the information in the following table about the market for a racquet with the new material. The company expects to sell the racquet for six years. The equipment required for the project has no salvage value. The equipment will be depreciated straight-line to zero over the project's life. The required return for projects of this type is 13 percent, and the company has a 40 percent tax rate. Assume the company has other profitable ongoing operations that are sufficient to cover any losses. (Assume that if your taxable income is negative, you get a tax credit) Optimistic Pessimistic 130,000 Expected 150,000 25% 165,000 21% 28% 140 $ 145 $ 150 Market size Market share Selling price Variable costs per unit Fixed costs per year Initial investment 102 $ 98 94 $ 1,015,000 $ 950,000 900,000 $ 2,200,000 $ 2,100,000 $ 2,000,000 Calculate the NPV of each scenario. Should you recommend the project