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McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $807 per set and have a variable cost of $411 per set. The company has spent $103914 for a marketing study that determined the company will sell 5359 sets per year for seven years. The marketing study also determined that the company will lose sales of 974 sets of its high-priced clubs. The high-priced clubs sell at $1146 and have variable costs of $707. The company will also increase sales of its cheap clubs by 1052 sets. The cheap clubs sell for $437 and have variable costs of $212 per set. The fixed costs each year will be $887994. The company has also spent $118353 on research and development for the new clubs. The plant and equipment required will cost $2858427 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $134960 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 quantity of the new clubs sold?
stream of cash flows. Cash flow at the end of the first year will be $9,000, and cash flows in future years are expected to grow indefinitely at an annual rate of 4%. If the discount rate for this project is 10%, what is the project NPV?
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An extra tractor will lead to an increase in revenue for a farmer in successive years of £500, £4000, £3,000, £3,000 and £1,000, after which the tractor is sold for £1,000. Assuming that the first revenue is treated as current and the interest rate i..
Suppose an individual investor starts with a portfolio that consists of one randomly selected stock. What will happen to the portfolio’s risk if more and more randomly selected stocks are added? Explain the differences between stand-alone risk, diver..
The firm hopes to sell the equipment for $2,000 at the end of five years and faces a tax rate of 35%, what is the after-tax salvage value?
Microtech Corporation is expanding rapidly, and it currently needs to retain all of its earnings, hence it does not pay any dividends, with the first dividend of $1.00 coming 3 years from today. The dividend should grow rapidly—at a rate of 50 percen..
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