Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Problem 11-20 Project Analysis (L01, 2] McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $870 per

image text in transcribed

Problem 11-20 Project Analysis (L01, 2] McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $870 per set and have a variable cost of $430 per set. The company has spent $350,000 for a marketing study that determined the company will sell 70,900 sets per year for seven years. The marketing study also determined that the company will lose sales of 14,000 sets of Its high-priced clubs. The high-priced clubs sell at $1,240 and have variable costs of $700. The company will also increase sales of Its cheap clubs by 16,000 sets. The cheap clubs sell for $460 and have variable costs of $250 per set. The fixed costs each year will be $10,800,000. The company has also spent $3,000,000 on research and development for the new clubs. The plant and equipment required will cost $39,300,000 and will be depreciated on a straight-line basis. The new clubs will also require an Increase in net working capital of $3,700,000 that will be returned at the end of the project. The tax rate is 25 percent, and the cost of capital is 13 percent. a. Calculate the payback period. (Do not round Intermediate calculations and round your answer to 3 decimal places, e.g., 32.161.) b. Calculate the NPV. (Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. Calculate the IRR. (Do not round Intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) a. years Payback period NPV b. C. IRR 96

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

Financial Management An Introduction

Authors: Jim McMenamin

1st Edition

0415181623, 9780415181624

More Books

Students also viewed these Finance questions

Question

Did I overlook any information that would be helpful in the future?

Answered: 1 week ago

Question

6 Explain the expectancy theory of motivation.

Answered: 1 week ago