McGilla Golf has decided to sell a new line of golf clubs. The length of this pr
ID: 2766437 • Letter: M
Question
McGilla Golf has decided to sell a new line of golf clubs. The length of this project is seven years. The company has spent $1919288 on research and development for the new clubs. The plant and equipment required will cost $28608439. The new clubs will also require an increase in net working capital of $1287669 that will be returned at the end of the project. The OCF of the project will be $8073497. The tax rate is 34 percent, and the cost of capital is 8 percent. What is the NPV for this project?
Explanation / Answer
Intial Investment Year Discount Factor PV The plant and equipment -28608439 net working capital -1287669 -29896108 NOW 1 -29896108 OCF 8073497 1 to 7 5.20637 42033613.05 Release Of NWC 1287669 7 0.58349 751342.4938 NPV for this project 12888847.55