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You have been hired as a capital budgeting analyst by a sporting goods firm that manufactures athletic shoes and has captured 1 0 % of

You have been hired as a capital budgeting analyst by a sporting goods firm that manufactures athletic shoes and has captured 10% of the overall shoe market (the total market is worth $100 million a year). The fixed costs associated with manufacturing these shoes are $2 million a year, and variable costs are 40% of revenues. The companys tax rate is 40%. The firm believes that it can increase its market share to 20% by investing $10 million in a new distribution system (which can be depreciated over the systems life of 10 years to a salvage value of zero) and spending $1 million a year in additional advertising. The company proposes to continue to maintain working capital at 10% of annual revenues. The discount rate to be used for this project is 8%.
How much would the firms market share would have to increase for you to be indifferent to taking or rejecting this project? Please answer in terms of percent increase

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