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MINI CASE II You are an analyst for a major hockey stick manufacturer. The company is considering a new design for their hockey sticks. The
MINI CASE II You are an analyst for a major hockey stick manufacturer. The company is considering a new design for their hockey sticks. The market information is set our in the table below. The company plans to sell the new hockey sticks for six years. The equipment for the project has no salvage value. The equipment will be depreciated to zero over the project's life. The required rate of return is 14%, and the company has a 40% tax rate. Should you recommend the project? Explain you answer. Scenario Pessimistie Expected Optimistic Market Size (units) 130,000 150,000 165,000 Market Share 21% 25% 27% Selling Price S 140 $ 148S 150 Variable Costs per unit S 10218 9518 941 Fixed Costs per year S 1,015,000 $ 915,000 910,000 Initial Investment/equipment S 2,200,000 $ 2,100,000 $ 2,050,000
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