Reference no: EM133495664

Question

ZTX Co. has decided to sell a new line of golf clubs. The clubs will sell for $762 per set and have a variable cost of $372 per set. The company has spent $174,519 for a marketing study that determined the company will sell 77,446 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,872 sets per year of its high-priced clubs. The high-priced clubs sell at $1,007 and have variable costs of $554. The company will also increase sales of its cheap clubs by 11,207 sets per year. The cheap clubs sell for $362 and have variable costs of $147 per set. The fixed costs each year will be $14,431,792. The company has also spent $1,478,642 on research and development for the new clubs. The plant and equipment required will cost $29,615,928 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $2,102,088 that will be returned at the end of the project. The tax rate is 36 percent, and the cost of capital is 15 percent. Calculate the NPV for this project.