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 will require new equipment for $412,878.00 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 $60.24 $60.24 Units sold 18,280.00 10,857.00 COGS 40.00% of sales 40.00% of sales Selling and Administrative 21.00% of sales 21.00% of sales Calloway has a 14.00% cost of capital and a 36.00% tax rate. The firm expects to sell the equipment after 2 years for a NSV of $146,512.00. What is the NPV of the project?

Answer 1