Suppose that Calloway golf would like to capitalize on Phil Michelson winning the Open Championship in...

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Suppose that Calloway golf would like to capitalize on PhilMichelson winning the Open Championship in 2013 by releasing a newputter. The new product will require new equipment for $414,452.00that will be depreciated using the 5-year MACRS schedule. Theproject will run for 2 years with the following forecastednumbers:
Year 1 Year 2
Putter price $62.01 $62.01
Units sold 18,933.00 10,513.00
COGS 41.00% of sales 41.00% of sales
Selling and Administrative 18.00% of sales 18.00% of sales

Calloway has a 13.00% cost of capital and a 40.00% tax rate. Thefirm expects to sell the equipment after 2 years for a NSV of$148,000.00.
What is the project cash flow for year 2? (include the terminalcash flow here)
Answer Format: Currency: Round to: 2 decimalplaces.

	Year 1	Year 2
Putter price	$62.01	$62.01
Units sold	18,933.00	10,513.00
COGS	41.00% of sales	41.00% of sales
Selling and Administrative	18.00% of sales	18.00% of sales

Answer & Explanation Solved by verified expert

4.5 Ratings (896 Votes)

Depreciation rates for 1 year and 2 year under 5 year macrs is 20 and 32 Calculation of tax benefit Cost of asset 41445200 2 year Depreciation provided41445252 21551504 Book value 19893696 Sale See Answer

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Suppose that Calloway golf would like to capitalize on PhilMichelson winning the Open Championship in 2013 by releasing a newputter. The new product will require new equipment for $414,452.00that will be depreciated using the 5-year MACRS schedule. Theproject will run for 2 years with the following forecastednumbers:Year 1Year 2Putter price$62.01$62.01Units sold18,933.0010,513.00COGS41.00% of sales41.00% of salesSelling and Administrative18.00% of sales18.00% of salesCalloway has a 13.00% cost of capital and a 40.00% tax rate. Thefirm expects to sell the equipment after 2 years for a NSV of$148,000.00.What is the project cash flow for year 2? (include the terminalcash flow here)Answer Format: Currency: Round to: 2 decimalplaces.