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 23 percent tax rate. Market size Market share Selling price Variable costs per unit Fixed costs per year Initial investment Pessimistic 113,000 19% $164 $ 106 $978,000 $ 1,968,000 Expected 123,000 23% $ 169 $ 102 $ 923,000 $1,818,000 Optimistic 135,000 25% $ 173 $ 99 $ 893,000 $ 1,798,000 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.)
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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…You are the financial analyst for a tennis racquet manufacturer. The company is considering using a graphite-like material in its tennis racquets. The company has estimated the information in the following table about the market for a racquet with the new material. The company expects to sell the racquet for six years. The equipment required for the project has no salvage value. The equipment will be depreciated straight-line to zero over the project's life. The required return for projects of this type is 13 percent, and the company has a 40 percent tax rate. Assume the company has other profitable ongoing operations that are sufficient to cover any losses. Should you recommend the project? Market sire Market share Selling price Variable costs per unit Fised costs per year Initial investment Pessimistic 135,000 PVPessimistic PVExpected $ UPVoptimistic S 21 N 1 1 Expected 155,000 25 % 145 104.50 $ 1,065,000 11,075,000 12,450,000 $ 2,350,000 2262561 4998543 7326488 150 100.50 $ $…
- 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 four 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 12 percent, and the company has a 34 percent tax rate. Pessimistic Expected Optimistic Market size 121,000 136,000 161,000 Market share 21 % 24 % 26 % Selling price $ 144 $ 149 $ 155 Variable costs per unit $ 98 $ 93 $ 92 Fixed costs per year $ 959,000 $ 914,000 $ 884,000 Initial investment $ 1,248,000 $ 1,180,000 $ 1,112,000 Calculate the NPV for each case for this project.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 four years. The equipment required for the project has no salvage value. The required return for projects of this type is 12 percent, and the company has a 34 percent tax rate. Pessimistic Expected Optimistic Market size 121,000 136,000 161,000 Market share 21 % 24 % 26 % Selling price $ 144 $ 149 $ 155 Variable costs per unit $ 98 $ 93 $ 92 Fixed costs per year $ 959,000 $ 914,000 $ 884,000 Initial investment $ 1,248,000 $ 1,180,000 $ 1,112,000 Calculate the NPV for each case for this projectYour company has been approached to bid on a contract to sell 5,000 voice recognition (VR) computer keyboards a year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $3.5 million and will be depreciated on a straight- line basis to a zero salvage value. Production will require an investment in net working capital of $415,000 which will be returned at the end of the project, and the equipment can be sold for $345,000 at the end of production. Fixed costs are $590,000 per year, and variable costs are $79 per unit. In addition to the contract, you feel your company can sell 12,200, 14,300, 18,300, and 10,800 additional units to companies in other countries over the next four years, respectively, at a price of $181. This price is fixed. The tax rate is 24 percent, and the required return is 12 percent. Additionally, the president of the company will undertake the…
- You are the financial analyst for furniture manufacturer. The company is considering using a certain new raw material in its furniture. The company has estimated the information in the following table about the market for a chair with the new material. The company expects to sell the chair 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 130,000 150,000 165,000 Market share 21% 25% 28% Selling price $140 $145 $150 Variable costs per unit $102 $98 $94 Fixed costs per year $1,015,000 $950,000 $900,000 Initial investment $2,200,000 $2,100,000 $2,000,000 Required: Should you recommend the project?Your company has been approached to bid on a contract to sell 19,000 voice recognition (VR) computer keyboards per year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4,000,000 and will be depreciated on a straight- line basis to a zero salvage value. Production will require an investment in net working capital of $140,000 to be returned at the end of the project, and the equipment can be sold for $260,000 at the end of production. Fixed costs are $795,000 per year and variable costs are $43 per unit. In addition to the contract, you feel your company can sell 4,600, 12,200, 14,200, and 7,500 additional units to companies in other countries over the next four years, respectively, at a price of $140. This price is fixed. The tax rate is 23 percent, and the required return is 12 percent. Additionally, the president of the company will undertake the project only…You are also considering another project that has a physical life of 3 years—that is, the machinery will be totally worn out after 3 years. However, if the project were terminated prior to the end of 3 years, the machinery would have a positive salvage value. Here are the project’s estimated cash flows: Using the 10% cost of capital, what is the project’s NPV if it is operated for the full 3 years? Would the NPV change if the company planned to terminate the project at the end of Year 2? At the end of Year 1? What is the project’s optimal (economic) life?
- Your company has been approached to bid on a contract to sell 20,000 voice recognition (VR) computer keyboards per year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4,800,000 and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $180,000 to be returned at the end of the project, and the equipment can be sold for $300,000 at the end of production. Fixed costs are $835,000 per year and variable costs are $41 per unit. In addition to the contract, you feel your company can sell 5,400, 13,000, 15,000, and 8,300 additional units to companies in other countries over the next four years, respectively, at a price of $140. This price is fixed. The tax rate is 21 percent, and the required return is 11 percent. Additionally, the president of the company will undertake the project only…Your company has been approached to bid on a contract to sell 21,000 voice recognition (VR) computer keyboards per year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $4,200,000 and will be depreciated on a straight-line basis to a zero salvage value. Production will require an investment in net working capital of $150,000 to be returned at the end of the project, and the equipment can be sold for $270,000 at the end of production. Fixed costs are $805,000 per year and variable costs are $45 per unit. In addition to the contract, you feel your company can sell 4,800, 12,400, 14,400, and 7,700 additional units to companies in other countries over the next four years, respectively, at a price of $130. This price is fixed. The tax rate is 25 percent, and the required return is 11 percent. Additionally, the president of the company will undertake the project only…Your company has been approached to bid on a contract to sell 5,000 voice recognition (VR) computer keyboards per year for four years. Due to technological improvements, beyond that time they will be outdated and no sales will be possible. The equipment necessary for the production will cost $3.4 million and will be depreciated on a straight- line basis to a zero salvage value. Production will require an investment in net working capital of $395,000 to be returned at the end of the project, and the equipment can be sold for $325,000 at the end of production. Fixed costs are $595,000 per year, and variable costs are $85 per unit. In addition to the contract, you feel your company can sell 12,300, 14,600, 19,200, and 11,600 additional units to companies in other countries over the next four years, respectively, at a price of $180. This price is fixed. The tax rate is 23 percent, and the required return is 10 percent. Additionally, the president of the company will undertake the project…