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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $766 per set and have a variable cost of $410 per set. The company has spent $10528 for a marketing study that determined the company will sell 5445 sets per year for seven years. The marketing study also determined that the company will lose sales of 962 sets of its high-priced clubs. The high-priced clubs sell at $1052 and have variable costs of $671. The company will also increase sales of its cheap clubs by 1050 sets. The cheap clubs sell for $416 and have variable costs of $215 per set. The fixed costs each year will be $943867. The company has also spent $100252 on research and development for the new clubs. The plant and equipment required will cost $2899963 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $133683 that will be returned at the end of the project. The tax rate is 32 percent, and the cost of capital is 9 percent. What is the annual OCF for this project?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92870586

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