Question
Thomas Arr Golf Corp has decided to sell a new line of golf clubs. The clubs will sell for $1000 per set and have a
Thomas Arr Golf Corp has decided to sell a new line of golf clubs. The clubs will sell for $1000 per set and have a variable cost of $447 per set. The company has spent $560,000 for a marketing study that determined the company will sell 84,000 sets per year for 7 years. The marketing study also determined that the company will lose sales of 8,800 sets per year of its high-priced clubs. The high-priced clubs sell at $1,345 and have variable costs of $665. The company will also increase sales of its cheap clubs by 11,200 sets per year. The cheap clubs sell for $356 and have variable costs of $153 per set. The fixed costs each year will be $14,750,000. The company has also spent $2,000,000 on research and development for the new clubs. The plant and equipment required will cost $48,000,000 and will be depreciated to a book value of zero on a straight-line basis. The equipment useful life is 9 years and the salvage value is subsequently assumed to be $3,000,000. The new clubs will also require an increase in net working capital of $3,125,000 that will be returned at the end of the project. The tax rate is 24% and the appropriate discount rate is 11% for this project. What is the depreciation expense per year? Round your answer to two decimal places.
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