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The Ultimate recreational tennis racket

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solution


Question

Question;You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand. You estimate the sales price of The Ultimate to be $480 per unit and sales volume to be 1,030 units in year 1, 1,267 units in year 2, and 1,328 units in year 3. The project has a three-year life. Variable costs amount to $225 per unit and fixed costs are $100,100 per year. The project requires an initial investment of $160,000 in assets, which will be depreciated straight-line to zero over the three-year project life. The actual market value of these assets at the end of year 3 is expected to be $35,300. NWC requirements at the beginning of each year will be approximately 20 percent of the projected sales during the coming year. The tax rate is 34 percent and the required return on the project is 10 percent.What will the cash flows for this project be in year 0, year 1, year 2, and year 3

 

Paper#50479 | Written in 18-Jul-2015

Price : $21
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