20. Project Analysis. McGilla Golf has decided to sell a newline of golf clubs. The clubs will sell for $845 per set and have avariable cost of $405 per set. The company has spent $150,000 for amarketing study that determined the company will sell 60,000 setsper year for seven years. The marketing study also determined thatthe company will lose sales of 10,000 sets of its high-pricedclubs. The high- priced clubs sell at $1,175 and have variablecosts of $620. The company will also increase sales of its cheapclubs by 12,000 sets. The cheap clubs sell for $435 and havevariable costs of $200 per set. The fixed costs each year will be$9.75 million. The company has also spent $1 million on researchand development for the new clubs. The plan and equipment requiredwill cost $37.1 million and will be depreciated on a straight-linebasis. The new clubs will also require an increase in net workingcapital of $1.7 million that will be returned at the end of theproject. The tax rate is 25 percent, and the cost of capital if 10percent. Calculate the payback period, the NPV, and the IRR.

21. Sensitivity Analysis. In the previous problem, you feel thatthe values are accurate to within +/ 10 percent. What are thebest-case and worst-case NPVs? Hint: The price and variable costsfor the two existing sets of clubs are known with certainty onlythe sales gained or lost are uncertain.