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

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Unformatted text preview: 2-1Lecture#9Mini Case: GOODWEEK TIRES, INC.2-2DataResearch and development$ 10,000,000 Test marketing cost$ 5,000,000 Initial equipment cost$ 140,000,000 Equipment salvage value$ 54,000,000 MACRSYear 1 depreciation14.30%Year 2 depreciation24.50%Year 3 depreciation17.50%Year 4 depreciation12.50%2-3DataOEM market:Price$ 38 Variable cost$ 22 Automobile production5,600,000 Growth rate2.50%Market share11.00%Replacement market:Price$ 59 Variable cost$ 22 Market sales14,000,000 Growth rate2.00%Market share8.00%Price increase above inflation1%VC increase above inflation1%Marketing and general costs$ 26,000,000 Inflation rate3.25%2-4DataRequired return15.90%Tax rate 40.00%Initial NWC$ 9,000,000 NWC percentage of sales15%2-5Case SolutionSince 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 =2-6Case SolutionYear 1Year 2Year 3Year 4Automobiles sold5,600,000Tires forautomobiles sold22,400,000SuperTread tires...
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This note was uploaded on 07/04/2011 for the course FINA 463 taught by Professor Tsyplakov during the Fall '10 term at South Carolina.

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

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