Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please give a detailed answer on how you got the numbers McGilla Golf has decided to sell a new line of golf clubs. The clubs
please give a detailed answer on how you got the numbers
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $880 per set and have a variable cost of $480 per set. The company has spent $158,000 for a marketing study that determined the company will sell 62,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 10,300 sets of its high-priced clubs. The high-priced clubs sell at $1,180 and have variable costs of $780. The company will also increase sales of its cheap clubs by 11,800 sets. The cheap clubs sell for $520 and have variable costs of $270 per set. The fixed costs each year will be $9,180,000. The company has also spent $1,190,000 on research and development for the new clubs. The plant and equipment required will cost $29,260,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,380,000 that will be returned at the end of the project. The tax rate is 24 percent, and the cost of capital is 12 percent. Suppose you feel that the values are accurate to within only 10 percent. What are the best-case and worst-case NPVs? (Hint: The price and variable costs for the two existing sets of clubs are known with certainty; only the sales gained or lost are uncertain.) ( A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started