McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for$860 per set and have a variable cost of $420 per set. The company hasspent $330,000 for a marketing study that determined the company will sell70,300 sets per year for seven years. The marketing study also determinedthat the company will lose sales of 13,600 sets of its high-priced clubs. Thehigh-priced clubs sell at $1,230 and have variable costs of $690. The companywill also increase sales of its cheap clubs by 15,600 sets. The cheap clubs sellfor $450 and have variable costs of $240 per set. The fixed costs each yearwill be $10,700,000. The company has also spent $2,800,000 on research anddevelopment for the new clubs. The plant and equipment required will cost$39,100,000 and will be depreciated on a straight-line basis. The new clubswill also require an increase in net working capital of $3,500,000 that will bereturned at the end of the project. The tax rate is 23 percent, and the cost ofcapital is 11 percent.Suppose you feel that the values are accurate to within only ±10 percent. Whatare the best-case and worst-case NPVs? (Hint: The price and variable costs forthe two existing sets of clubs are known with certainty; only the sales gainedor lost are uncertain.) (A negative answer should be indicated by a minussign. Do not round intermediate calculations and round your answers to 2decimal places, e.g., 32.16.)Best-caseNPVWorst-caseNPV

Name: McGilla Golf has decided to sell a new line of golf clubs. The clubs
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Description: McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for$860 per set and have a variable cost of $420 per set. The company hasspent $330,000 for a marketing study that determined the company will sell70,300 sets per year fo

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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 answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Best-case NPV Worst-case NPV

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 answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Best-case NPV Worst-case NPV

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter18: The Management Of Accounts Receivable And Inventories

Section: Chapter Questions

Problem 10P

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