What are the best-case and worst-case npvs

Assignment Help Financial Management
Reference no: EM132012161

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $740 per set and have a variable cost of $340 per set. The company has spent $144,000 for a marketing study that determined the company will sell 56,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,900 sets of its high-priced clubs. The high-priced clubs sell at $1,040 and have variable costs of $640. The company will also increase sales of its cheap clubs by 10,400 sets. The cheap clubs sell for $380 and have variable costs of $200 per set. The fixed costs each year will be $9,040,000. The company has also spent $1,050,000 on research and development for the new clubs. The plant and equipment required will cost $28,280,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,240,000 that will be returned at the end of the project. The tax rate is 40 percent, and the cost of capital is 10 percent.

Suppose you feel that the values are accurate to within only ±10 percent. What are the best-case and worst-case NPVs? (Hint: The price and variable costs for the two existing sets of clubs are known with certainty; only the sales gained or lost are uncertain.) (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Reference no: EM132012161


Write a Review


Financial Management Questions & Answers

  Calculate the net financial impact

Calculate the Net Financial Impact of Buying the 100 stocks and the hedging with futures.

  What annual return you will need to earn to meet this goal

You plan on retiring in 20 years. You currently have $275,000 and think you will need $1,000,000 to retire. Assuming you don’t deposit any additional money into the account, what annual return you will need to earn to meet this goal.

  Calculate the firms earnings per share

Statement of retained earnings Hayes Enterprises began 2015 with a retained earnings balance of $928,000. During 2015, the firm earned $377,000 after taxes. From this amount, preferred stockholders were paid $47,000 in dividends. Prepare a statement ..

  A company issues zero coupon bonds which mature

A company issues zero coupon bonds which mature in 30 years. These bonds can be bought for $99.38 and then pay no annual interest payments, only $1000 at maturity. What is the annual percentage cost of these bonds to the issuing company?

  Thinking about trading cars

Jesse Pinkman is thinking about trading cars. He estimates he will still have to borrow $29,000 to pay for his new car.

  Large communications firm

Randall Wallace is a vice president at a large communications firm. His compensation includes a salary of $500,000, a bonus of $100,000 and a stock option package that allows him to purchase 30,000 shares of the company’s stock at $50 per share.

  What is the yield to maturity

The bonds issued by Stainless Tubs bear a 6 percent coupon, payable semiannually. The bonds mature in 11 years and have a $1,000 face value. Currently, the bonds sell for $989. What is the yield to maturity? Can you please show the steps?

  Prepare gulings statement of cash flows for the year end

Construct a statement of cash flows.- Prepare Guling's statement of cash flows for the year ended December 31, 2014, complete with its proper heading.

  Reports total operating revenues

Hospital A's reports total operating revenues of $1 million and net income of $15,000. Hospital B reports total operating revenues of $1milliin and new income of $10,000. hospital b's accounts receivable must be higher than Hospital A's accounts rece..

  What is the price of the combined test assuming

When the tests are combined, only one syringe, form, and sterile ban­dage will be used. Furthermore, only one charge for breakage/losseswill apply. Two blood vials are required, and reagent costs will remainthe same (reagents from all three tests ..

  Make the investors equally willing to receive the dividend

What personal tax rate would make the investors equally willing to receive the dividend or to let Carlson invest the money?

  Identify the web site the sender and perceived

find a web site that has an ldquoabout usrdquo section or a ldquopress releaserdquo section. write a three to four 3-4

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd