McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $845 per set and have a variable cost of $405 per set. The company has spent $150,000 for a marketing study that determined the company will sell 60,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 10,000 sets of its high-priced clubs. The high-priced clubs sell at $1,175 and have variable costs of $620. The company will also increase sales of its cheap clubs by 12,000 sets. The cheap clubs sell for $435 and have variable costs of $200 per set. The fixed costs each year will be $9.75 million. The company has also spent $1 million on research and development for the new clubs. The plant and equipment required will cost $37.1 million and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1.7 million that will be returned at the end of the project. The tax rate is 25 percent, and the cost of capital is 10 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.)
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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell...
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $800 per set and have a variable cost of $400 per set. The company has spent $150,000 for a marketing study that determined the company will sell 54,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 9,500 sets of its high-priced clubs. The high-priced clubs sell at $1,100 and have variable costs of...
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $765 per set and have a variable cost of $414 per set. The company has spent $15016 for a marketing study that determined the company will sell 5259 sets per year for seven years. The marketing study also determined that the company will lose sales of 933 sets of its high-priced clubs. The high-priced clubs sell at $1154 and have variable costs of...
Project Analysis McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $950 per set and have a variable cost of $415 per set. The company has spent $150,000 for a marketing study that determined the company will sell 50,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 9,000 sets of its high-priced clubs. The high-priced clubs sell at $1,450 and have variable...
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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $845 per set and have a variable cost of $405 per set. The company has spent $300,000 for a marketing study that determined the company will sell 69,400 sets per year for seven years. The marketing study also determined that the company will lose sales of 13,000 sets of its high-priced clubs. The high-priced clubs sell at $1,215 and have variable costs of...
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $920 per set and have a variable cost of $451 per set. The company has spent $250,000 for a marketing study that determined the company will sell 85,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,850 sets per year of its high-priced clubs. The high-priced clubs sell at $1,350 and have variable...
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $900 per set and have a variable cost of $300 per set. The company has spent $144,000 for a marketing study that determined the company will sell 58,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 13,000 sets of its high-priced clubs. The high-priced clubs sell at $1,400 and have variable costs of...
Project Analysis McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $950 per set and have a variable cost of $415 per set. The company has spent $150,000 for a marketing study that determined the company will sell 50,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 9,000 sets of its high-priced clubs. The high-priced clubs sell at $1,450 and have variable...
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 $419 per set. The company has spent $170,000 for a marketing study that determined the company will sell 77,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,450 sets per year of its high-priced clubs. The high-priced clubs sell at $1,310 and have variable...
McGilla Golf has decided to sell a new line of golf clubs. The company would like to know the sensitivity of NPV to changes in the price of the new clubs and the quantity of new clubs sold. The clubs will sell for $805 per set and have a variable cost of $365 per set. The company has spent $220,000 for a marketing study that determined the company will sell 67,000 sets per year for seven years. The marketing study...