Problem 7-25 Scenario Analysis

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 4 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 12 percent and the company has a 21 percent tax rate.

		Pessimistic				Expected				Optimistic
	Market size		126,000				136,000				148,000
	Market share		20	%			24	%			26	%
	Selling price	$	144			$	149			$	153
	Variable costs per unit	$	97			$	93			$	90
	Fixed costs per year	$	969,000			$	914,000			$	884,000
	Initial investment	$	1,330,000			$	1,180,000			$	1,160,000

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.)