Problem 9-24 Project Analysis [LO 2]

McGilla Golf has decided to sell a new line of golf clubs. Theclubs will sell for $731 per set and have a variable cost of $361per set. The company has spent $151,000 for a marketing study thatdetermined the company will sell 75,100 sets per year for sevenyears. The marketing study also determined that the company willlose sales of 8,600 sets per year of its high-priced clubs. Thehigh-priced clubs sell at $1,210 and have variable costs of $550.The company will also increase sales of its cheap clubs by 11,100sets per year. The cheap clubs sell for $341 and have variablecosts of $126 per set. The fixed costs each year will be$11,210,000. The company has also spent $1,010,000 on research anddevelopment for the new clubs. The plant and equipment requiredwill cost $24,570,000 and will be depreciated on a straight-linebasis. The new clubs will also require an increase in net workingcapital of $1,510,000 that will be returned at the end of theproject. The tax rate is 35 percent, and the cost of capital is 15percent.

  

Calculate the payback period, the NPV, and the IRR. (Donot round intermediate calculations and round your answers to 2decimal places, e.g., 32.16. Enter your IRR answer as apercent.)

  

Payback period		years
Net present value	$
Internal rate of return		%