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Lecture_9_

# Lecture_9_ - Lecture#9 Mini Case GOODWEEK TIRES INC 2-1...

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2-1 Lecture#9 Mini Case: GOODWEEK TIRES, INC.

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2-2 Data Research and development \$ 10,000,000 Test marketing cost \$ 5,000,000 Initial equipment cost \$ 140,000,000 Equipment salvage value \$ 54,000,000 MACRS Year 1 depreciation 14.30% Year 2 depreciation 24.50% Year 3 depreciation 17.50% Year 4 depreciation 12.50%
2-3 Data OEM market: Price \$ 38 Variable cost \$ 22 Automobile production 5,600,000 Growth rate 2.50% Market share 11.00% Replacement market: Price \$ 59 Variable cost \$ 22 Market sales 14,000,000 Growth rate 2.00% Market share 8.00% Price increase above inflation 1% VC increase above inflation 1% Marketing and general costs \$ 26,000,000 Inflation rate 3.25%

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2-4 Data Required return 15.90% Tax rate 40.00% Initial NWC \$ 9,000,000 NWC percentage of sales 15%
2-5 Case Solution Since the price and variable costs increase by 1 percent, and the inflation rate is 3.25 percent, the nominal growth in both variables is: R = R =

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2-6 Case Solution Year 1 Year 2 Year 3 Year 4 Automobiles sold 5,600,000 Tires for automobiles sold 22,400,000 SuperTread tires sold 2,464,000 The sales of new automobiles will grow by 2.5 percent per year, and there are four tires per car.
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Lecture_9_ - Lecture#9 Mini Case GOODWEEK TIRES INC 2-1...

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