Question
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $765 per set and have a variable cost
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $765 per set and have a variable cost of $414 per set. The company has spent $15016 for a marketing study that determined the company will sell 5259 sets per year for seven years. The marketing study also determined that the company will lose sales of 933 sets of its high-priced clubs. The high-priced clubs sell at $1154 and have variable costs of $745. The company will also increase sales of its cheap clubs by 1089 sets. The cheap clubs sell for $400 and have variable costs of $216 per set. The fixed costs each year will be $909194. The company has also spent $116270 on research and development for the new clubs. The plant and equipment required will cost $2878318 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $129555 that will be returned at the end of the project. The tax rate is 29 percent, and the cost of capital is 9 percent. What is the annual OCF for this project?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started