Scenario Analysis
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 five years. The equipment required for the project has no salvage value. The required return for projects of this type is 13 per
cent and the company has a 40 per cent tax rate. Should you recommend the project? Assume 20 per cent reducing balance depreciation.