What is the sensitivity of the npv to changes in the


McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $837 per set and have a variable cost of $360 per set. The company has spent $105887 for a marketing study that determined the company will sell 5291 sets per year for seven years. The marketing study also determined that the company will lose sales of 940 sets of its high-priced clubs. The high-priced clubs sell at $1125 and have variable costs of $721. The company will also increase sales of its cheap clubs by 1002 sets. The cheap clubs sell for $438 and have variable costs of $220 per set. The fixed costs each year will be $877118. The company has also spent $117930 on research and development for the new clubs. The plant and equipment required will cost $2844375 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $131640 that will be returned at the end of the project. The tax rate is 29 percent, and the cost of capital is 9 percent. What is the sensitivity of the NPV to changes in the quantity of the new clubs sold?

[Hint: Think of this as, "How much will NPV change if I sell one more set of new clubs each year?"]

Request for Solution File

Ask an Expert for Answer!!
Financial Management: What is the sensitivity of the npv to changes in the
Reference No:- TGS02827386

Expected delivery within 24 Hours