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