McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for
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Question:
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $ per set and have a variable cost of $ per set. The company has spent $ for a marketing study that determined the company will sell sets per year for seven years. The marketing study also determined that the company will lose sales of sets per year of its highpriced clubs. The highpriced clubs sell at $ and have variable costs of $ The company will also increase sales of its cheap clubs by sets per year. The cheap clubs sell for $ and have variable costs of $ per set. The fixed costs each year will be $ The company has also spent $ on research and development for the new clubs. The plant and equipment required will cost $ and will be depreciated on a straightline basis. The new clubs will also require an increase in net working capital of $ that will be returned at the end of the project. The tax rate is percent, and the cost of capital is percent. Calculate the payback period, the NPV and the IRR.
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