Question
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $778 per set and have a variable cost
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $778 per set and have a variable cost of $378 per set. The company has spent $13,244 for a marketing study that determined the company will sell 5,528 sets per year for seven years. The marketing study also determined that the company will lose sales of 940 sets of its high-priced clubs. The high-priced clubs sell at $1,099 and have variable costs of $737. The company will also increase sales of its cheap clubs by 1,024 sets. The cheap clubs sell for $432 and have variable costs of $223 per set. The fixed costs each year will be $932,721. The company has also spent $111,810 on research and development for the new clubs. The plant and equipment required will cost $2,825,600 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $125,048 that will be returned at the end of the project. The tax rate is 28 percent, and the cost of capital is 7 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