What is the annual OCF for this project

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Question - McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $776 per set and have a variable cost of $351 per set. The company has spent $16,846 for a marketing study that determined the company will sell 5,495 sets per year for seven years. The marketing study also determined that the company will lose sales of 923 sets of its high-priced clubs. The high-priced clubs sell at $1,023 and have variable costs of $712. The company will also increase sales of its cheap clubs by 1,037 sets. The cheap clubs sell for $472 and have variable costs of $252 per set. The fixed costs each year will be $938,007. The company has also spent $102,689 on research and development for the new clubs. The plant and equipment required will cost $2,811,241 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $129,139 that will be returned at the end of the project. The tax rate is 31 percent, and the cost of capital is 8 percent. What is the annual OCF for this project?

Reference no: EM132744595

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