Gilmore Golf, Inc is considering producing and selling a new line of golf clubs. The clubs will sell for $1000 per set and have a variable cost of $450 per set. The company has spent $250,000 for a marketing study that determined the company will sell 4,000 sets per year for 22 years. The marketing study also determined that the company will lose sales of 1,500 sets per year of its high-priced clubs, which currently sell for $1500 per set and have variable costs of $750. The fixed costs each year will be $200,000. The project will require a net working capital balance equal to 8% of sales, to be fully recouped at the end of the project. This net working capital must be invested immediately. The plant and equipment required will cost $3,800,000 and will be depreciated on a straight-line basis to zero over the lifetime of the project. The company estimates it will be able to sell the plant and equipment in twenty years for $150,000. The tax rate is 40% and the required return on the project is 14%.

a. Find the year zero total cash flow.

b. Find the OCF for years 1 through 20.

c. Complete the table on the following page.

d. Find the projects NPV, profitability index, and payback period.

e. Should they pursue the project? Why or why not?