Question
Gorilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $771 per set and have a variable cost
Gorilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $771 per set and have a variable cost of $425 per set. The company has spent $180,765 for a marketing study that determined the company will sell 5,237 sets per year for seven years. The marketing study also determined that the company will lose sales of 969 sets of its high-priced clubs. The high-priced clubs sell at $1,180 and have variable costs of $656. The company will also increase sales of its cheap clubs by 1,178 sets. The cheap clubs sell for $466 and have variable costs of $205 per set. The fixed costs each year will be $866,012. The company has also spent $102,547 on research and development for the new clubs. The plant and equipment required will cost $2,824,143 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $128,553 that will be returned at the end of the project. The tax rate is 33 percent, and the cost of capital is 12 percent. What is the sensitivity of the NPV to changes in the quantity of the new clubs sold? (don't round calculations)
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