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 $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

Calloway has a 15.00% cost of capital and a 39.00% tax rate. The firm expects to sell the equipment after 2 years for a NSV of $171,009.00.

What is the NPV of the project?

Answer 1