Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $735 per set and have a variable cost

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $735 per set and have a variable cost of $365 per set. The company has spent $155,000 for a marketing study that determined the company will sell 75,500 sets per year for seven years. The marketing study also determined that the company will lose sales of 9,000 sets per year of its high-priced clubs. The high-priced clubs sell at $1,250 and have variable costs of $590. The company will also increase sales of its cheap clubs by 11,500 sets per year. The cheap clubs sell for $345 and have variable costs of $130 per set. The fixed costs each year will be $11,250,000. The company has also spent $1,050,000 on research and development for the new clubs. The plant and equipment required will cost $24,850,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,550,000 that will be returned at the end of the project. The tax rate is 40 percent, and the cost of capital is 14 percent. Required: Calculate the payback period, the NPV, and the IRR. (Do not round intermediate calculations. Round your answers to 2 decimal places (e.g., 32.16).) Payback period years Net present value $ Internal rate of return %

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Institutions Management

Authors: Anthony Saunders

3rd Edition

007303259X, 978-0073032597

More Books

Students also viewed these Finance questions

Question

denigration of emotional outbursts; being reserved;

Answered: 1 week ago