You are the financial analyst for a tennis racket manufacturer. The company is considering using...
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Finance
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 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. The required return for projects of this type is 13 percent, and the company has a 40 percent tax rate. Should you recommend the project? Market size Market share Selling price Variable cost per year Fixed cost per Pessimistic 106,000 14% $121 $46 Expected 120,000 17% $125 $43 Optimistic 135,000 19% $130 $42 $795,000 $725,000 $675,000 $2,000,000 $1,900,000 $1,800,000 year Initial investment
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