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Please help solve this question. Thank you. McGlla Golf is evaluating a new line of golf clubs. The clubs will sell for $1,030 per set
Please help solve this question. Thank you.
McGlla Golf is evaluating a new line of golf clubs. The clubs will sell for $1,030 per set and have a varlable cost of $465 per set. The company has spent $165.000 for a marketing study that determined the company will sell 52,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 9,800 sets of its high-priced clubs. The high-priced clubs sell at $1,530 and have variable costs of $660. The company also will increase sales of its cheap clubs by 12,400 sets. The cheap clubs sell for $465 and have varlable costs of $195 per set. The fixed costs each year will be $9,800,000. The company has also spent $1,250,000 on research and development for the new clubs. The plant and equipment required will cost $32,200,000 and will be depreclated on a straight-line basis to a zero salvage value. The new clubs will also require an increase in net working capital of $2,620,000 that will be returned at the end of the project. The tax rate is 25 percent. and the cost of capital is 14 percent. a. Calculate the payback period. (Do not round intermediate calculations and round your answer to 3 decimal places, e.g., 32161.) b. Calculate the NPV. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g. 3216.) c. Calculate the IRR. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g. 3216 .) Step by Step Solution
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