Master It Problems are progressive problems that focus on important financial concepts that can be completed within

Excel. Business today requires managers to master the use of Excel. These assignments are intended to use, develop, and

grasp your Excel skills to solve problems.

You do not need to do these in a report format, but you should submit your assignment in an Excel document.

EXCEL MASTER IT$!$ PROBLEM

After extensive research and development, Goodweek Tires, Inc., has recently developed a new tire, the SuperTread, and must decide whether to

make the investment necessary to produce and market. The tire would be ideal for drivers doing a large amount of wet weather and off$-$road

driving in addition to normal freeway usage. The research and development costs so far have totaled about $$10$ million. The SuperTreadwould be

put on the market beginning this year, and Goodweek expects it to stay on the market for a total of four years. Test marketing costing $$5$ million

has shown that there is a significant market for a SuperTread$-$type tire.

As a financial analyst at Goodweek Tires, you have been asked by your CFO, Adam Smith, to evaluate the SuperTread project and provide a

recommendation on whether to go ahead with the investment. Except for the initial investment that will occur immediately, assume all cash flows

will occur at year$-$end.

Goodweek must initially invest $$120$ million in production equipment to ${?}^2$ e the SuperTread. This equipment can be sold for $$51$ million at the

end of four years. Goodweek intends to sell the SuperTread to two distinct markets:

The Original Equipment Manufacturer $($OEM$)$ Market. The OEM market consists primarily of the large automobile companies $($e$.$g$.,$ GeneralMotors$)$

that buy tires for new cars. In the OEM market, the SuperTread is expected to sell for $$36$ per tire. The variable cost to produce each tire is $$18.$

The Replacement Market. The replacement market consists of all tires purchased after the automobile has left the factory. This market allows for

higher margins, and Goodweek expects to sell the SuperTread for $$59$ per tire there. Variable costs are the same as in the OEM market.