You are the financial analyst for a tennis racket manufacturer. The company is considering using a graphitelike material in its tennis rackets. The com has estimated the information in the following table about the market for a racket with the new material. The company expects to sell the racke years. The equipment required for the project will be depreciated on a straight-line basis and has no salvage value. The required return for proje this type is 12 percent and the company has a 25 percent tax rate. Market size Market share Selling price Variable costs per unit Fixed costs per year Initial investment Pessimistic 120,000 20% $ 163 $113 $985,000 $1,390,000 Expected 130,000 24% $168 $109 $930,000 $1,240,000 Optimistic 142,000 26% $172 $106 $900,000 $1,220,000 Calculate the NPV for each case for this project. Assume a negative taxable income generates a tax credit. (A negative amount should be indicated minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Pessimistic Expected

You are the financial analyst for a tennis racket manufacturer. The company is considering using a graphitelike material in its tennis rackets. The com has estimated the information in the following table about the market for a racket with the new material. The company expects to sell the racke years. The equipment required for the project will be depreciated on a straight-line basis and has no salvage value. The required return for proje this type is 12 percent and the company has a 25 percent tax rate. Market size Market share Selling price Variable costs per unit Fixed costs per year Initial investment Pessimistic 120,000 20% $ 163 $113 $985,000 $1,390,000 Expected 130,000 24% $168 $109 $930,000 $1,240,000 Optimistic 142,000 26% $172 $106 $900,000 $1,220,000 Calculate the NPV for each case for this project. Assume a negative taxable income generates a tax credit. (A negative amount should be indicated minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Pessimistic Expected

Name: You are the financial analyst for a tennis racket manufacturer. The c
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Description: You are the financial analyst for a tennis racket manufacturer. The company is considering using a graphitelike material in its tennis rackets. The companyhas estimated the information in the following table about the market for a racket with the ne

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 5R

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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 21 percent tax rate. Pessimistic Expected Optimistic Market size 116,000 126,000 138,000 Market share 19 % 23 % 25 % Selling price $ 166 $ 171 $ 175 Variable costs per unit $ 109 $ 105 $ 102 Fixed costs per year $ 981,000 $ 926,000 $ 896,000 Initial investment $ 1,986,000 $ 1,836,000 $ 1,816,000 Calculate the NPV for each case for this project. Assume a…
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 5 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 14 percent and the company has a 22 percent tax rate. Market size Market share Pessimistic 127,000 Expected Optimistic 137,000 149,000 18% 22% 24% Selling price $ 146 $151 $155 Variable costs per $96 $92 $ 89 unit Fixed costs per year $ 968,000 $ 913,000 Initial investment $ 1,620,000 $ 1,470,000 $ 883,000 $1,450,000 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…
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