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 $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)

Answer #1

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 $423,694.00
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
$60.21
$60.21
Units sold
18,548.00
10,420.00
COGS
39.00% of sales
39.00% of sales
Selling and Administrative
21.00% of sales
21.00% of sales...

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 $419,490.00
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
$64.74
$64.74
Units sold
19,211.00
11,977.00
COGS
41.00% of sales
41.00% of sales
Selling and Administrative
20.00% of sales
20.00% of sales...

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 $404,208.00
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 $61.04 $61.04 Units sold 18,557.00
11,693.00 COGS 40.00% of sales 40.00% of sales Selling and
Administrative 21.00% of sales 21.00% of sales...

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 $410,451.00
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
$64.13
$64.13
Units sold
18,255.00
11,608.00
COGS
42.00% of sales
42.00% of sales
Selling and Administrative
21.00% of sales
21.00% of sales...

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 $402,191.00
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
$63.62
$63.62
Units sold
19,240.00
11,648.00
COGS
40.00% of sales
40.00% of sales
Selling and Administrative
21.00% of sales
21.00% of sales...

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...

McGilla Golf has decided to sell a new line of golf clubs. The
company would like to know the sensitivity of NPV to changes in the
price of the new clubs and the quantity of new clubs sold. The
clubs will sell for $780 per set and have a variable cost of $340
per set. The company has spent $170,000 for a marketing study that
determined the company will sell 62,000 sets per year for seven
years. The marketing study...

McGilla Golf has decided to sell a new line of golf clubs. The
clubs will sell for $700 per set and have a variable cost of $340
per set. The company has spent $150,000 for a marketing study that
determined the company will sell 46,000 sets per year for seven
years. The marketing study also determined that the company will
lose sales of 12,000 sets of its high-priced clubs. The high-priced
clubs sell at $1,100 and have variable costs of...

You are evaluating a project for The Tiff-any golf club,
guaranteed to correct that nasty slice. You estimate the sales
price of The Tiff-any to be $430 per unit and sales volume to be
1,000 units in year 1; 1,500 units in year 2; and 1,325 units in
year 3. The project has a 3-year life. Variable costs amount to
$240 per unit and fixed costs are $100,000 per year. The project
requires an initial investment of $174,000 in assets,...

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