Problem $7-15$ Scenario Analysis

McGilla Golf is evaluating a new line of golf clubs. The clubs will sell for $$1,060$ per set

and have a variable cost of $$480$ per set. The company has spent $$172,500$ for a

marketing study that determined the company will sell $53,500$ sets per year for seven

years. The marketing study also determined that the company will lose sales of $10,100$

sets of its high$-$priced clubs. The high$-$priced clubs sell at $$1,560$ and have variable costs

of $$690.$ The company also will increase sales of its cheap clubs by $12,700$ sets. The

cheap clubs sell for $$480$ and have variable costs of $$210$ per set. The fixed costs each

year will be $$9,950,000.$ The company has also spent $$1,325,000$ on research and

development for the new clubs. The plant and equipment required will cost $$33,250,000$

and will be depreciated on a straight$-$line basis to a zero salvage value. The new clubs

will also require an increase in net working capital of $$2,710,000$ that will be returned at

the end of the project. The tax rate is $23$ percent, and the cost of capital is $13$ 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 amount should be indicated by a minus sign. Do not round intermediate

calculations and round your answers to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

Answer is complete but not entirely correct.