Question

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

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 $400,531.00 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 $61.54 $61.54
Units sold 18,494.00 11,850.00
COGS 38.00% of sales 38.00% of sales
Selling and Administrative 19.00% of sales 19.00% of sales


Calloway has a 13.00% cost of capital and a 39.00% tax rate. The firm expects to sell the equipment after 2 years for a NSV of $130,296.00.

What is the project cash flow for year 2? (include the terminal cash flow here)

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