You Are Evaluating a Project for the Ultimate Recreational Tennis

question 362

Multiple Choice

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 $400 and sales volume to be 1,000 units in year 1, 1,250 units in year 2, and 1,325 units in year 3. The project has a three year life. Variable costs amount to $225 per unit and fixed costs are $100,000 per year. The project requires an initial investment of $165,000 which is depreciated straight-line to zero over the three year project life. The actual market value of the initial investment at the end of year 3 is $35,001. Initial net working capital investment is $75,000 and NWC will maintain a level equal to 20% of sales each year thereafter. The tax rate is 34% and the required return on the project is 10%.

What is EBIT for the project in the first year?

• A) $13,200
• B) $15,000
• C) $20,000
• D) $44,000
• E) $52,000

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Definitions:

Suicide Plan

Detailing the method, timing, and location in which an individual intends to attempt suicide.

Reminiscence Therapy

A psychological intervention involving the discussion of past experiences, personal stories, and memories as a way to improve emotional well-being.

Self-Help Group

A supportive group setting where members share common experiences and challenges, often related to recovery or personal growth.

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