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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $838 per set and have a variable cost of $395 per set. The company has spent $11137 for a marketing study that determined the company will sell 5536 sets per year for seven years. The marketing study also determined that the company will lose sales of 975 sets of its high-priced clubs. The high-priced clubs sell at $1137 and have variable costs of $670. The company will also increase sales of its cheap clubs by 1154 sets. The cheap clubs sell for $462 and have variable costs of $222 per set. The fixed costs each year will be $893859. The company has also spent $103550 on research and development for the new clubs. The plant and equipment required will cost $2868265 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $133228 that will be returned at the end of the project. The tax rate is 33 percent, and the cost of capital is 12 percent. What is the annual OCF for this project?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92869493

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