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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
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 six years. The equipment required for the project has no salvage value. The required return for projects of this type is 13 percent, and the company has a 40 percent tax rate.
Pessimistic | Expected | Optimistic | |||||||||||
Market size | 111,000 | 126,000 | 151,000 | ||||||||||
Market share | 20 | % | 23 | % | 25 | % | |||||||
Selling price | $156 | $161 | $167 | ||||||||||
Variable costs per unit | $110 | $105 | $104 | ||||||||||
Fixed costs per year | $971,000 | $926,000 | $896,000 | ||||||||||
Initial investment | $1,938,000 | $1,836,000 | $1,734,000 | ||||||||||
Calculate the NPV for each case for this project. (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your final answers to 2 decimal places. (e.g., 32.16)) |
Pessimistic | $ | |
Expected | $ | |
Optimistic | $ | |
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