You are the financial analyst for a tennis racket manufacturer. The company is considering using a graphite like 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 five years. The equipment required for the project has no salvage value. The required return for projects of this type is 14 percent, and the company has a 35 percent tax rate.

Q: How do I calculate the NPV for: The Pessimistic? The Expected? The Optimistic?

Market size Market share Selling price Variable costs per unit Fixed costs per year Initial Investment Pessimistic Expected 128,000 113,000 19% 22% $ 158 $ 163 $ 169 $ 112 $ 107 $ 106 $ 973,000 $928,000 $898,000 $1,625,000 $1,540,000 $1,455,000 Optimistic 153,000 24%