Calculate the Payback Period and Net Present Value

Reference no: EM132723002

Question - Aussie Ltd has decided to sell a new line of golf clubs. The club will sell for $700 per set and have a variable cost of $340 per set. The company has spent $150,000 for a marketing study that determined the company will sell 46,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 12,000 sets of its high-priced clubs. The high-priced clubs sell at $1100 and have variable costs of $550. The company will also increase sales of its cheap clubs by 20,000 sets. The cheap clubs will sell for $300 and have variable costs of $100 per set. The fixed costs each year will be $8,000,000. The company has also spent $1,000,000 on research and development for the new clubs. The plant and equipment required will cost $16,100,000 and will be depreciated on a straight line basis.

The new clubs will also require an increase in net working capital of $900,000 and that will be returned at the end of the project. The tax rate is 30%, and the cost of capital is 14%.

Required - Calculate the Payback Period and Net Present Value followed by your recommendations.

Reference no: EM132723002

Questions Cloud

How would set up a statistical test : 10 employees while recording unsafe acts. How would you set up a statistical test to determine if there were any changes in the unsafe acts observed?

Prepare a contribution format income statement : Prepare a contribution format income statement that shows the expected net operating income each year from the franchise outlet

Determine probability that at least one envelope a red one : If three envelopes are selected at? random, without? replacement, determine the probability that at least one envelope a red one

Find the value of test statistic : A random sample of 42 adult females have white blood cell count with a mean of 7.45, and a standard deviation of 2.23, find the value of test statistic?

Calculate the Payback Period and Net Present Value : The new clubs will also require an increase in net working capital of $900,000. Calculate the Payback Period and Net Present Value followed

What is the amount of the check : Block Company returns $1800 of merchandise that was damaged, along with a check to settle the account within the discount period. What is the amount of check

Determine the sample size necessary to estimate p : Determine the sample size necessary to estimate "p", the population proportion, for the following information: E = 0.05, p = 0.55

Prepare zambrano journal entries to record the acquisition : Prepare Zambrano's journal entries to record the Soriano acquisition assuming its initial cash payment to the former owners was (a) $656,700 & (b) $777,100

Determine the relationship between the x- and y- values : Determine the relationship between the x- and y- values.{(1, -1), (2, -2), (3, -3), (4, -4)}Type your answer as an equation for the value of y

User Account

All Pages