Please Show Your Work!!!! McGilla Golf has decided to sell a new line of golf cl

Question

Please Show Your Work!!!!

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $780 per set and have a variable cost of $330 per set. The company has spent $95,000 for a marketing study that determined the company will sell 29,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 6,000 sets of its high-priced clubs. The high-priced clubs sell at $1,280 and have variable costs of $700. The company will also increase sales of its cheap clubs by 4,000 sets. The cheap clubs sell for $430 and have variable costs of $120 per set. The fixed costs each year will be $6,300,000. The company has also spent $945,000 on research and development for the new clubs. The plant and equipment required will cost $15,000,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $888,000 that will be returned at the end of the project. The tax rate is 34 percent, and the cost of capital is 11 percent.

Suppose you feel that the values are accurate to within only

Explanation / Answer

A company that makes golf clubs is selling a new line of clubs. The clubs will sell for $750 per set and have a variable cost of $330 per set. The company has spent $150,000 for a marketing study to determine they will sell 51,000 sets per year for 7 years. That marketing study also determined the company will lose sales of 11,000 sets of its higher priced clubs. The high priced clubs sell at $1200 and have a variable cost of $650. The company will also increase sales of its cheap clubs by 9,500 sets. The fixed costs each year will be $8,100,000.The company has also spent $1,000,000 on R&D of for the new clubs.

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