Hit or Miss Sports is introducing a new product this year. It is a see at night soccer ball. If the balls are a hit, the

[answerhappygod]

Hit or Miss Sports is introducing a new product this year. It is
a see at night soccer ball. If the balls are a hit, the firm
expects to be able to sell each year 150,000 balls at a price of
40$ each. If the new product is a bust, only 50,000 units can be
sold at a price of $30. The variable cost of each ball is $20 and
fixed costs are 400,000 a year. The cost of the manufacturing
equipment is $6 million and the project life is estimated at 10
years. The firm will use straight-line depreciation. The firm’s tax
rate is 25% and the discount rate is 16% A)
If each outcome is equally likely what is the expected NPV? (draw
the option tree) [5]
B) Now if the firm can abandon the project after 1 year if the
sales are weak and sell of the remaining manufacturing equipment
for 4 million, would this change the decision? [5] (draw the option
tree)