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McGilla Golf has decided to sell a new line of golf clubs. The length of this...

McGilla Golf has decided to sell a new line of golf clubs. The length of this project is seven years. The company has spent $1110000 on research and development for the new clubs. The plant and equipment required will cost $28780977 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1258624 that will be returned at the end of the project. The OCF of the project will be $8895196. The tax rate is 32 percent. What is the IRR for this project?

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Expert Solution

Here the spent on reseach and development cost is not useful for decision making because the cost is not recoverable.this cost is sunk cost.

jeff jeffy answered 2 years ago
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