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 $410,664.00 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 | $63.67 | $63.67 |
| Units sold | 19,234.00 | 10,484.00 |
| COGS | 40.00% of sales | 40.00% of sales |
| Selling and Administrative | 21.00% of sales | 21.00% of sales |
Calloway has a 15.00% cost of capital and a 40.00% tax rate. The firm expects to sell the equipment after 2 years for a NSV of $164,802.00.
What is the project cash flow for year 1?
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Handbook Of The Fundamentals Of Financial Decision Making
Authors: Leonard C MacLean, William T Ziemba
1st Edition
9814417343, 978-9814417341
