Question
ParRange Golf has decided to sell a new line of golf clubs. The clubs will sell for $825 per set and have a variable cost
ParRange Golf has decided to sell a new line of 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, 95,000, 125,000, 105,000, 80,000 sets per year for five years. 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 at $1,250 and have variable costs of $630. The company will also increase sales of its cheap clubs by 11,000 sets per year. The cheap clubs sell for $375 and have variable costs of $140 per set. The fixed costs each year will be $14,350,000. The company has also spent $1,000,000 on research and development for the new clubs. The plant and equipment required will cost $29,400,000 and the depreciation schedule has not been decided yet. Production of a new line of golf clubs will require $1,500,000 in net working capital to start and additional net working capital investments required during the project period are obscure. The tax rate is 40 percent, and the cost of capital is 14 percent. Q. How sensitive is the NPV to the sales? For example, whats the NPV if the golf club will be sold 1000 more units than expected above each year? ** The report must show the work process step by step in English
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