You are the financial analyst for a tennis racket manufacturer. The company is considering using a graphite-like
Question:
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 table below 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 and will be depreciated on a straight-line basis. The required return for projects of this type is 13 percent, and the company has a 23 percent tax rate. Should you recommend the project?
Pessimistic Expected Optimistic Market size 81,000 97,000 112,000 Market share 14% 17% 19% Selling price 110 $ 116 2$ 119 Variable costs per year 2$ 38 $4 36 2$ 34 Fixed costs per year $ 615,000 $ 575,000 $ 550,000 Initial investment $1,550,000 $1,450,000 $1,350,000
Step by Step Answer:
To calculate the unit sales for each scenario we multiply the market sales times the companys market ...View the full answer
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
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