You are the financial analyst for a tennis racket manufacturer. The company is considering using a graphitelike 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 6 years. The equipment required for the project will be depreciated on a straight-line basis and has no salvage value. The required return for projects of this type is 13 percent and the company has a 24 percent tax rate.

Calculate the NPV for each case for this project. Assume a negative taxable income generates a tax credit. (A negative amount should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

pessimistic

expected

optimistic

Pessimistic Market size 119,000 Market share 19% Selling price $ 167 Variable costs per $ 112 unit Fixed costs per $984,000 year Initial investment $2,004,000 Expected 129,000 23% $ 172 $ 108 Optimistic 141,000 25% $ 176 $ 105 $ 929,000 $1,854,000 $ 899,000 $1,834,000