Homework Help is Here – Start Your Trial Now!
Business
Finance
McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $885 per set and have a variable cost of $423 per set. The company has spent $180,000 for a marketing study that determined the company will sell 78,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,500 sets per year of its high-priced clubs. The high-priced clubs sell at $1,315 and have variable costs of $635. The company will also increase sales of its cheap clubs by 10,600 sets per year. The cheap clubs sell for $332 and have variable costs of $135 per set. The fixed costs each year will be $14,150,000. The company has also spent $1,300,000 on research and development for the new clubs. The plant and equipment required will cost $41,500,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $3,525,000 that will be returned at the end of the project. The tax rate is 23 percent, and the cost of capital is 13 percent. Calculate the payback period, the NPV, and the IRR. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter your IRR answer as a percent. Payback period Net present value Internal rate of return years %

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $885 per set and have a variable cost of $423 per set. The company has spent $180,000 for a marketing study that determined the company will sell 78,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,500 sets per year of its high-priced clubs. The high-priced clubs sell at $1,315 and have variable costs of $635. The company will also increase sales of its cheap clubs by 10,600 sets per year. The cheap clubs sell for $332 and have variable costs of $135 per set. The fixed costs each year will be $14,150,000. The company has also spent $1,300,000 on research and development for the new clubs. The plant and equipment required will cost $41,500,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $3,525,000 that will be returned at the end of the project. The tax rate is 23 percent, and the cost of capital is 13 percent. Calculate the payback period, the NPV, and the IRR. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter your IRR answer as a percent. Payback period Net present value Internal rate of return years %

Principles of Accounting Volume 2
Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 1PA: Artisan Metalworks has a bottleneck in their production that occurs within the engraving department....
See similar textbooks
icon
Related questions
Question

Nikul 

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $885 per set and have a variable cost of $423 per set. The company has spent $180,000 for a marketing study that determined the company will sell 78,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,500 sets per year of its high-priced clubs. The high-priced clubs sell at $1,315 and have variable costs of $635. The company will also increase sales of its cheap clubs by 10,600 sets per year. The cheap clubs sell for $332 and have variable costs of $135 per set. The fixed costs each year will be $14,150,000. The company has also spent $1,300,000 on research and development for the new clubs. The plant and equipment required will cost $41,500,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $3,525,000 that will be returned at the end of the project. The tax rate is 23 percent, and the cost of capital is 13 percent. Calculate the payback period, the NPV, and the IRR. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter your IRR answer as a percent. Payback period Net present value Internal rate of return years %
Transcribed Image Text:McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $885 per set and have a variable cost of $423 per set. The company has spent $180,000 for a marketing study that determined the company will sell 78,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,500 sets per year of its high-priced clubs. The high-priced clubs sell at $1,315 and have variable costs of $635. The company will also increase sales of its cheap clubs by 10,600 sets per year. The cheap clubs sell for $332 and have variable costs of $135 per set. The fixed costs each year will be $14,150,000. The company has also spent $1,300,000 on research and development for the new clubs. The plant and equipment required will cost $41,500,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $3,525,000 that will be returned at the end of the project. The tax rate is 23 percent, and the cost of capital is 13 percent. Calculate the payback period, the NPV, and the IRR. Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Enter your IRR answer as a percent. Payback period Net present value Internal rate of return years %
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Factors Affecting Housing Decision
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Principles of Accounting Volume 2
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Essentials Of Business Analytics
Essentials Of Business Analytics
Statistics
ISBN:
9781285187273
Author:
Camm, Jeff.
Publisher:
Cengage Learning,
Managerial Accounting: The Cornerstone of Busines…
Managerial Accounting: The Cornerstone of Busines…
Accounting
ISBN:
9781337115773
Author:
Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS