Question
Suppose that Calloway golf would like to capitalize on Phil Michelson winning the Open Championship in 2013 by releasing a new putter. The new product
Suppose that Calloway golf would like to capitalize on Phil Michelson winning the Open Championship in 2013 by releasing a new putter. The new product will require new equipment for $420,199.00 that will be depreciated using the 5-year MACRS schedule. The project will run for 2 years with the following forecasted numbers:
Year 1 Year 2
Putter price $61.07 $61.07
Units sold 18,112.00 10,391.00
COGS 8.00% of sales 38.00% of sales
Selling and Administrative 20.00% of sales 20.00% of sales
Calloway has a 12.00% cost of capital and a 38.00% tax rate. The firm expects to sell the equipment after 2 years for a NSV of $160,342.00.
What is the project cash flow for year 1?
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