Question

ZTX Co. has decided to sell a new line of golf clubs. The clubs will sell for $749 per set and have a variable cost of $340 per set. The company has spent $178,145 for a marketing study that determined the company will sell 79,118 sets per year for seven years. The marketing study also determined that the company will lose sales of 8,104 sets per year of its high-priced clubs. The high-priced clubs sell at $1,195 and have variable costs of $509. The company will also increase sales of its cheap clubs by 11,950 sets per year. The cheap clubs sell for $376 and have variable costs of $122 per set. The fixed costs each year will be $14,530,209. The company has also spent $1,326,964 on research and development for the new clubs. The plant and equipment required will cost $29,824,268 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $2,047,010 that will be returned at the end of the project. The tax rate is 38 percent, and the cost of capital is 15 percent. Calculate the NPV for this project. Answer in $ to two decimals.

Answer 1

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