McGilla Golf is evaluating a new golf club. The clubs will sell for $890 per set and have avariable cost of $395 per set. The company has spent $130,000 for a marketing studythat determined the company will sell 45,000 sets per year for seven years. Themarketing study also determined that the company will lose sales of 8.400 sets of itshigh-priced clubs. The high-priced clubs sell at $1,390 and have variable costs of $520.The company also will increase sales of Its cheap clubs by 11,000 sets. The cheap clubssell for $395 and have variable costs of $125 per set. The fixed costs each year will be$9,100,000. The company has also spent $900,000 on research and development forthe new clubs. The plant and equipment required will cost $27,300,000 and will bedepreciated on a straight-line basis to a zero salvage value. The new clubs will alsorequire an increase in net working capital of $2,200,000 that will be returned at the endof the project. The tax rate is 21 percent, and the cost of capital is 12 percent. What is thesenstivity of the NPV to changes in the price and quantity sold of the new clubs? (Do notround Intermediate calculations and round your answers to 2 decimal places, e.g..32.16.)ANPVIAPANPVIAQ

Net Present Value (NPV) is a financial metric used in capital budgeting and investment analysis to…

Answered: McGilla Golf Is evaluating a new golf…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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