McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $875 per set and have a variable cost of $430 per set. The company has spent $150,000 for a marketing study that determined the company will sell 60,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 12,000 sets of its high-priced clubs. The high-priced clubs sell at $1,100 and have variable costs of $620. The company will also increase sales of its cheap clubs by 15,000 sets. The cheap clubs sell for $400 and have variable costs of $210 per set. The fixed costs each year will be $9,300,000. The company has also spent $1,000,000 on research and development for the new clubs. The plant and equipment required will cost $29,400,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,400,000 that will be returned at the end of the project. The tax rate is 40 percent, and the cost of capital is 14 percent. Suppose you feel that the values are accurate to within only 10 percent.

1)What are the best-case and worst-case NPVs? (Hint: The price and variable costs for the two existing sets of clubs are known with certainty; only the sales gained or lost are uncertain.) (Negative amounts should be indicated by a minus sign.

2) Create an active spreadsheet that calculates the NPV in each scenario by generalizing the uncertainty to unit price, variable costs and fixed costs.

3) how the NPV changes when the discount rate (cost of capital) changes to 16%

4) Calculate the expected NPV and the standard deviation of the NPV

5) Calculate the coefficient of variation

6) Calculate the accounting breakeven quantity in every scenario.

7) Calculate the financial breakeven quantity in every scenario.

8) Calculate the cash breakeven quantity in every scenario.

9) explain whether this project should be undertaken.