Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

McGilla Golf is evaluating a new golf club. The clubs will sell for $950 per set and have a variable cost of $425 per set.

McGilla Golf is evaluating a new golf club. The clubs will sell for $950 per set and have a variable cost of $425 per set. The company has spent $145,000 for a marketing study that determined the company will sell 48,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 9,000 sets of its high-priced clubs. The high-priced clubs sell at $1,450 and have variable costs of $580. The company also will increase sales of its cheap clubs by 11,600 sets. The cheap clubs sell for $425 and have variable costs of $155 per set. The fixed costs each year will be $9,400,000. The company has also spent $1,050,000 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 to a zero salvage value. The new clubs also will also require an increase in net working capital of $2,380,000 that will be returned at the end of the project. The tax rate is 22 percent and the cost of capital is 14 percent. What is the senstivity of the NPV to changes in the price and quantity sold of the new clubs? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

DeltaNPV/DeltaP:

DeltaNPV/DeltaQ:

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_2

Step: 3

blur-text-image_3

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

Project Financing Asset-Based Financial Engineering

Authors: John D Finnerty

3rd Edition

1118421841, 9781118421840

More Books

Students also viewed these Finance questions

Question

What kinds of communication help sustain long-distance romances?

Answered: 1 week ago