McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $500 per set and have a variable cost of $200 per set. The company has spent $122,000 for a marketing study that determined the company will sell 50,000 sets per year for seven years. The marketing study also determined that the company will lose sales of 12,000 sets of its high-priced clubs. The high-priced clubs sell at $700 and have variable costs of $300. The company will also increase sales of its cheap clubs by 6,000 sets. The cheap clubs sell for $200 and have variable costs of $100 per set. The fixed costs each year will be $6,125,000. The company has also spent $857,000 on research and development for the new clubs. The plant and equipment required will cost $17,500,000 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $831,000 that will be returned at the end of the project. The tax rate is 37 percent, and the cost of capital is 13 percent.
The payback period is years (Round your answer to 3 decimal places, e.g. 32.161), the NPV is $ (Negative amount should be indicated by a minus sign. Round your answer to the nearest whole dollar amount, e.g. 32), and the IRR is percent. (Do not include the percent sign (%). Round your answer to 2 decimal places, e.g. 32.16.)
The solution explains how to estimate the cash flows for the project and calculate the payback period, NPV and IRR