Corporate Finance
12th Edition
ISBN: 9781259918940
Author: Ross, Stephen A.
Publisher: Mcgraw-hill Education,
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Chapter 7, Problem 14QAP
Summary Introduction
To calculate: Payback period, NPV, and IRR
Introduction: The term "payback time" refers to the number of years needed to recoup the initial monetary outlay. The difference between the current value of
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Baird Golf has decided to sell a new line of golf clubs. The clubs will sell for $715 per set and have a variable cost of $385 per set. The
company has spent $150,000 for a marketing study that determined the company will sell 75,000 sets per year for seven years. The
marketing study also determined that the company will lose sales of 10,000 sets of its high-priced clubs. The high-priced clubs sell at
$1,150 and have variable costs of $620. The company will also increase sales of its cheap clubs by 12,000 sets. The cheap clubs sell
for $425 and have variable costs of $195 per set. The fixed costs each year will be $9,400,000. The company has also spent
$1,000,000 on research and development for the new clubs. The plant and equipment required will cost $30,100,000 and will be
depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,400,000 that will be
returned at the end of the project. The tax rate is 40%, and the cost of…
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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $970 per set and have a variable cost of $491 per set.
The company has spent $350,000 for a marketing study that determined the company will sell 95,000 sets per year for seven years.
The marketing study also determined that the company will lose sales of 9,350 sets per year of its high-priced clubs. The high-priced
clubs sell at $1,400 and have variable costs of $720. The company will also increase sales of its cheap clubs by 12,300 sets per year.
The cheap clubs sell for $400 and have variable costs of $186 per set. The fixed costs each year will be $15,850,000. The company
has also spent $3,000,000 on research and development for the new clubs. The plant and equipment required will cost $60,200,000
and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $4,375,000 that
will be returned at the end of the project. The tax rate is 25…
: McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $15 per set and have a variable cost of $365 per set. The company has spent $150,000 for a marketing study that determined the company will sell 55,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 10,000 sets of its high-priced clubs. The high-priced clubs sell at $1,345 and have variable costs of $730. The company will also increase sales of its cheap clubs by 12,000 sets. The cheap clubs sell for $445 and have variable costs of $210 per set. The fixed costs each year will be $9.45 million. The company has also spent $1 million on research and development for the new clubs. The plant and equipment required will cost $39.2 million and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1.85 million that will be returned at the end of the project. The tax rate is 25 percent, and…
Chapter 7 Solutions
Corporate Finance
Ch. 7 - Forecasting Risk What is forecasting risk? In...Ch. 7 - Sensitivity Analysis and Scenario Analysis What is...Ch. 7 - Prob. 3CQCh. 7 - Break-Even Point As a shareholder of a firm that...Ch. 7 - Prob. 5CQCh. 7 - Real Options Why does traditional NPV analysis...Ch. 7 - Real Options The Mango Republic has just...Ch. 7 - Prob. 8CQCh. 7 - Prob. 9CQCh. 7 - Project Analysis You are discussing a project...
Ch. 7 - Sensitivity Analysis and Break-Even Point We are...Ch. 7 - Prob. 2QAPCh. 7 - Prob. 3QAPCh. 7 - Prob. 4QAPCh. 7 - Prob. 5QAPCh. 7 - Prob. 6QAPCh. 7 - Prob. 7QAPCh. 7 - Prob. 8QAPCh. 7 - Prob. 9QAPCh. 7 - Prob. 10QAPCh. 7 - Prob. 11QAPCh. 7 - Prob. 12QAPCh. 7 - Prob. 13QAPCh. 7 - Prob. 14QAPCh. 7 - Prob. 15QAPCh. 7 - Prob. 16QAPCh. 7 - Prob. 17QAPCh. 7 - Prob. 18QAPCh. 7 - Prob. 19QAPCh. 7 - Prob. 20QAPCh. 7 - Prob. 21QAPCh. 7 - Prob. 22QAPCh. 7 - Prob. 23QAPCh. 7 - Prob. 24QAPCh. 7 - Prob. 25QAPCh. 7 - Prob. 26QAPCh. 7 - Prob. 28QAPCh. 7 - Prob. 29QAPCh. 7 - Prob. 30QAP
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