Question
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $841 per set and have a variable cost
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $841 per set and have a variable cost of $362 per set. The company has spent $10765 for a marketing study that determined the company will sell 5449 sets per year for seven years. The marketing study also determined that the company will lose sales of 976 sets of its high-priced clubs. The high-priced clubs sell at $1131 and have variable costs of $683. The company will also increase sales of its cheap clubs by 1145 sets. The cheap clubs sell for $457 and have variable costs of $234 per set. The fixed costs each year will be $921271. The company has also spent $103457 on research and development for the new clubs. The plant and equipment required will cost $2808900 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $125631 that will be returned at the end of the project. The tax rate is 30 percent, and the cost of capital is 11 percent. What is the annual OCF for this project?
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