GoodweekTiresSolution7e

GoodweekTiresSolution7e - Mini Case: Goodweek Tires, Inc....

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Mini Case: Goodweek Tires, Inc. Assumptions 120,000,000 7 51,428,571 Annual Depreciation Expense (7 year MACRS) Ending Book Year MACRS % Depreciation Value 1 14.29% 17,148,000 102,852,000 2 24.49% 29,388,000 73,464,000 3 17.49% 20,988,000 52,476,000 Last year of project 4 12.49% 14,988,000 37,488,000 5 8.93% 10,716,000 26,772,000 6 8.93% 10,716,000 16,056,000 7 8.93% 10,716,000 5,340,000 8 4.45% 5,340,000 0 SuperTread price/unit in OEM market (year 1) 36.00 SuperTread price/unit in Replacement market (year 1) 59.00 SuperTread cost/unit (year 1) 18.00 Year 1 marketing and admin costs 25,000,000 Annual inflation rate 3.25% Corporate Tax rate 40.00% Beta (1/24/97 Valueline) 1.30 Rf (30 year U.S. Treasury Bond) 5.50% 13.50% Re (from CAPM) R e = R f + β e [ R M - R f ] = 0.055 + 1.3[ 0.135 - 0.055 ] = 15.90% 15.90% Year 1 OEM Market for SuperTread (2 million new cars x 4 tires/car)
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GoodweekTiresSolution7e - Mini Case: Goodweek Tires, Inc....

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