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Problem: McGill Golf has decided to vend new line of golf clubs. The clubs will sell for $750 per set and have variable cost of $360 per set. The company has spent $150,000 for marketing study that determined the company will sell 72,000 sets per year for 7 years. The marketing study as well determined that the company will lose sales of 8500 sets per year of its high priced clubs. The high priced sell at $1,100 and have variable costs of $540. The company will also raise stakes of its cheap clubs by 11,000 sets per year. The cheap clubs sell for $360 and have variable cost of $125 per set. The fixed costs each and every year will be $13,900.00. The company has also spent $1,000,000 on research and development for new clubs. The plant and equipment required will cost $28,700,000 and will be depreciated on straight-line value basis. The new clubs will also require a raise in net working capital of $2,100,000 that will be returned at the end of project. The tax rate is 40 percent and cost of capital is 14 percent. Compute the payback period and NPV.

Financial Accounting, Accounting

  • Category:- Financial Accounting
  • Reference No.:- M94193

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