Group Project Case Solutions

Group Project Case Solutions - Chapter 6 Goodweek Tires Inc...

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Chapter 6 Goodweek Tires, Inc. Input area: Research and development $10,000,000 Test marketing cost $5,000,000 Initial equipment cost $140,000,000 Equipment salvage value $54,000,000 Year 1 depreciation 14.30% Year 2 depreciation 24.50% Year 3 depreciation 17.50% Year 4 depreciation 12.50% 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 Tax rate 40.00% Inflation rate 3.25% Required return 15.90% Initial NWC $9,000,000 NWC percentage of sales 15% Output area: Nominal price increase 4.28% Nominal VC increase 4.28% Year 0 Year 1 Year 2 Year 3 Year 4 OEM: Automobiles sold 5,600,000 5,740,000 5,883,500 6,030,588 Tires for automobiles sold 22,400,000 22,960,000 23,534,000 24,122,350 SuperTread tires sold 2,464,000 2,525,600 2,588,740 2,653,459 Price $38.00 $39.24 $40.51 $41.83 Replacement market: Total tires sold in market 14,000,000 14,280,000 14,565,600 14,856,912 SuperTread tires sold 1,120,000 1,142,400 1,165,248 1,188,553 Price $59.00 $60.92 $62.90 $64.94 Revenue: OEM market $93,632,000 $99,091,916 $104,870,213 $110,985,458 Replacement market 66,080,000 69,592,152 73,290,975 77,186,390 Total $159,712,000 $168,684,068 $178,161,188 $188,171,848 Variable costs: OEM market $54,208,000 $57,942,694 $59,391,261 $60,876,043 Replacement market 24,640,000 26,209,112 25,635,456 26,148,165 Total $78,848,000 $84,151,806 $85,026,717 $87,024,208 Revenue
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Group Project Case Solutions - Chapter 6 Goodweek Tires Inc...

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