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McGilla Golf has made decision to sell new line of golf clubs. Clubs will sell for $500 per set and have variable cost of $200 per set. Company has spent $122,000 for marketing study which determined company will sell 50,000 sets per year for seven years. Marketing study also found out that company will lose sales of 12,000 sets of its high-priced clubs. High-priced clubs sell at $700 and have variable costs of $300. Company will also increase sales of its cheap clubs by 6,000 sets. Cheap clubs sell for $200 and have variable costs of $100 per set. Fixed costs each year will be $6,125,000. Company has also spent $857,000 on research and development for new clubs. Plant and equipment required will cost $17,500,000 and will be decreased on straight-line basis. New clubs will also need increase in net working capital of $831,000 which will be returned at the end of project. Tax rate is 37 percent, and cost of capital is 13 percent.

Compute payback period is years the NPV is, and IRR is percent.

Project Management, Management Studies

  • Category:- Project Management
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