Reference no: EM132758101

Question: McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $848 per set and have a variable cost of $423 per set. The company has spent $150,774 for a marketing study that determined the company will sell 5,587 sets per year for seven years. The marketing study also determined that the company will lose sales of 952 sets of its high-priced clubs. The high-priced clubs sell at $1,157 and have variable costs of $683. The company will also increase sales of its cheap clubs by 1,140 sets. The cheap clubs sell for $455 and have variable costs of $232 per set. The fixed costs each year will be $916,532. The company has also spent $116,863 on research and development for the new clubs. The plant and equipment required will cost $2,886,142 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $131,188 that will be returned at the end of the project. The tax rate is 34 percent, and the cost of capital is 9 percent. What is the sensitivity of the NPV to changes in the price of the new clubs?