McGilla Golf has decided to sell as new line of medium-priced golf clubs. The clubs will sell for $825 per set and have a variable cost of $370 per set. The company has spent $150,000 for a marketing study that determined the company will sell 74,000 medium-priced sets per year for seven years. The fixed costs each year for the new line of clubs will be $14,350,000.

The marketing study also determined that the company will lose sales of 8,900 sets per year of its high-priced clubs. The high-priced clubs sell for $1,250 and have variable costs of $630.

The company will also increase sales of its cheap clubs by 12,000 per year. The cheap clubs sell for $375 and have variable costs of $140 per set

The company has also spent $1,000,000 on research and development for the new line of clubs. The plant and equipment will cost $25,400,000 and will be depreciated on a seven-year straight line basis. The machinery will have no salvage value after 7 years. The new clubs will also require an increase in net working capital of $3,500,000, which will be returned after the proect.. The tax rate is 40 per cent and the cost of capital is 13 percent.

a. Calculated the net cash flows for years 0 through 7.

b. Calculate the payback period.

c. Calculate the NPV.

d. Without calculating the specific numbers, will the NPV increase or decrease if the company depreciates the equipment on a 7-year MACRS schedule, rather than straight line depreciation....? Explain your answer.