What is the sensitivity of the NPV to each of these variable

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McGilla Golf has decided to sell a new line of golf clubs and would like to know the sensitivity of NPV to changes in the price of the new clubs and the quantity of new clubs sold. The clubs will sell for $760 per set and have a variable cost of $360 per set. The company has spent $146,000 for a marketing study that determined the company will sell 58,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 9,100 sets of its high-priced clubs. The high-priced clubs sell at $1,060 and have variable costs of $660. The company will also increase sales of its cheap clubs by 10,600 sets. The cheap clubs sell for $400 and have variable costs of $210 per set. The fixed costs each year will be $9,060,000. The company has also spent $1,070,000 on research and development for the new clubs. The plant and equipment required will cost $28,420,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1,260,000 that will be returned at the end of the project. The tax rate is 40 percent, and the cost of capital is 12 percent. What is the sensitivity of the NPV to each of these variables?

What is ΔNPV/ΔP ? $_________

What is ΔNPV/ΔQ ? $_________

Reference no: EM131044915

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