McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $841 per set and have a variable cost of $399 per set. The company has spent $132,587 for a marketing study that determined the company will sell 5,487sets 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 $1,048 and have variable costs of $712. The company will also increase sales of its cheap clubs by 1,187 sets. The cheap clubs sell for $420 and have variable costs of $231 per set. The fixed costs each year will be $883,926. The company has also spent $114,854 on research and development for the new clubs. The plant and equipment required will cost $2,889,098 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $131,336 that will be returned at the end of the project. The tax rate is 30 percent, and the cost of capital is 8 percent. What is the sensitivity of the NPV to changes in the quantity of the new clubs sold?

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $841 per set and have a variable cost of $399 per set. The company has spent $132,587 for a marketing study that determined the company will sell 5,487sets 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 $1,048 and have variable costs of $712. The company will also increase sales of its cheap clubs by 1,187 sets. The cheap clubs sell for $420 and have variable costs of $231 per set. The fixed costs each year will be $883,926. The company has also spent $114,854 on research and development for the new clubs. The plant and equipment required will cost $2,889,098 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $131,336 that will be returned at the end of the project. The tax rate is 30 percent, and the cost of capital is 8 percent. What is the sensitivity of the NPV to changes in the quantity of the new clubs sold?

Essentials Of Business Analytics

1st Edition

ISBN:9781285187273

Author:Camm, Jeff.

Publisher:Camm, Jeff.

Chapter11: Monte Carlo Simulation

Section: Chapter Questions

Problem 3P

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