The financial analyst for a manufacturer of tennis rackets

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Reference no: EM131134349

You are the financial analyst for a manufacturer of tennis rackets that has identified a graphite-like material that it is considering using in its rackets. Given the following information about the results of launching a new racket, will you undertake the project? (Assumptions: Tax rate = 40%, Effective discount rate = 13%, Depreciation = $300,000 per year, and production will occur over the next five years only.)


Pessimistic

Expected

Optimistic

Market size

110,000

120,000

130,000

Market share

22%

25%

27%

Price

$115

$120

$125

Variable costs

$72

$70

$68

Fixed costs

$850,000

$800,000

$750,000

Investment

$1,500,000

$1,500,000

$1,500,000

Reference no: EM131134349

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