Question
11.22a...McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $830 per set and have a variable cost
11.22a...McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $830 per set and have a variable cost of $403 per set. The company has spent $193,611 for a marketing study that determined the company will sell 5,413 sets per year for seven years. The marketing study also determined that the company will lose sales of 946 sets of its high-priced clubs. The high-priced clubs sell at $1,152 and have variable costs of $698. The company will also increase sales of its cheap clubs by 1,013 sets. The cheap clubs sell for $423 and have variable costs of $242 per set. The fixed costs each year will be $943,256. The company has also spent $109,984 on research and development for the new clubs. The plant and equipment required will cost $2,883,275 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $125,608 that will be returned at the end of the project. The tax rate is 34 percent, and the cost of capital is 11 percent. What is the sensitivity of the NPV to changes in the price of the new clubs?
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