You are the financial analyst for a tennis racket manufacturer.The company is considering using a graphitelike material in itstennis rackets. The company has estimated the information in thefollowing table about the market for a racket with the newmaterial. The company expects to sell the racket for five years.The equipment required for the project has no salvage value andwill be depreciated on a straight-line basis. The required returnfor projects of this type is 14 percent, and the company has a 35percent tax rate. Pessimistic Expected Optimistic Market size122,000 137,000 162,000 Market share 19 % 22 % 24 % Selling price $143 $ 148 $ 154 Variable costs per unit $ 97 $ 92 $ 91 Fixed costsper year $ 958,000 $ 913,000 $ 883,000 Initial investment $1,555,000 $ 1,470,000 $ 1,385,000 Calculate the NPV for each casefor this project. Assume a negative taxable income generates a taxcredit.
