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 $413,387.00 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 | $60.42 | $60.42 |
| Units sold | 19,287.00 | 10,281.00 |
| COGS | 40.00% of sales | 40.00% of sales |
| Selling and Administrative | 19.00% of sales | 19.00% of sales |
Calloway has a 14.00% cost of capital and a 39.00% tax rate. The firm expects to sell the equipment after 2 years for a NSV of $156,088.00.
What is the project cash flow for year 1 and year 2? And the NPV of the project?
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Accounting What the Numbers Mean
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,
9th Edition
978-0-07-76261, 0-07-762611-7, 9780078025297, 978-0073527062
