Hit or Miss Sports is introducing a new product this year. If its see-at-night soccer balls are a hit the firm expects to be able to sell
53000 units a year at a price of $40 each. If the new product is a bust only 33000 units can be sold at a price of $35. The variable cost of
each ball is $10 and fixed costs are zero. The cost of the manufacturing equipment is $6.0 million and the project life is estimated at 10
years. The firm will use straight-line depreciation over the 10-year life of the project. The firm%u2019s tax rate is 30% and the discount
rate is 14%.
Hit or Miss Sports can expand production if the project is successful. By paying its workers overtime it can increase production by 28000
units; the variable cost of each ball will be higher however equal to $15 per unit. By how much does this option to expand production
increase the NPV of the project? (Assume the probability the see-at-night soccer balls will be a hit is 50%). (Do not round
intermediate calculations. Round your answer to the nearest dollar amount.)