Question

McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $844 per set and have a variable cost of $434 per set. The company has spent $11448 for a marketing study that determined the company will sell 5463 sets per year for seven years. The marketing study also determined that the company will lose sales of 973 sets of its high-priced clubs. The high-priced clubs sell at $1095 and have variable costs of $714. The company will also increase sales of its cheap clubs by 1141 sets. The cheap clubs sell for $475 and have variable costs of $242 per set. The fixed costs each year will be $919171. The company has also spent $116914 on research and development for the new clubs. The plant and equipment required will cost $2882693 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $125808 that will be returned at the end of the project. The tax rate is 29 percent, and the cost of capital is 10 percent. What is the annual OCF for this project? (Round your final answer to the nearest dollar amount. Omit the "$" sign and commas in your response. For example, $123,456.78 should be entered as 123457.)

Answer 1