Sensitivity of the npv to changes in price of new clubs

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Reference no: EM132037896

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $802 per set and have a variable cost of $404 per set. The company has spent $164253 for a marketing study that determined the company will sell 5276 sets per year for seven years. The marketing study also determined that the company will lose sales of 921 sets of its high-priced clubs. The high-priced clubs sell at $1145 and have variable costs of $656. The company will also increase sales of its cheap clubs by 1195 sets. The cheap clubs sell for $477 and have variable costs of $235 per set. The fixed costs each year will be $891439. The company has also spent $100003 on research and development for the new clubs. The plant and equipment required will cost $2868514 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $128185 that will be returned at the end of the project. The tax rate is 29 percent, and the cost of capital is 12 percent. What is the sensitivity of the NPV to changes in the price of the new clubs?

Reference no: EM132037896

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