Suppose that Calloway golf would like to capitalize on Phil Michelson winning the OpenChampionship in 2013 by releasing a new putter. The new product will require new equipmentfor $409,223.00 that will be depreciated using the 5-year MACRS schedule. The project will runfor 2 years with the following forecasted numbers:Putter priceUnits soldCOGSSelling and AdministrativeYear 1$61.54Year 2$61.5418,869.0010,636.0039.00% of sales39.00% of sales19.00% of sales19.00% of salesCalloway has a 13.00% cost of capital and a 39.00% tax rate. The firm expects to sell theequipment after 2 years for a NSV of $157,067.00.What is the project cash flow for year 2? (include the terminal cash flow here)

The problem requires the determination of the cash flows for year 2. Cash flow refers to the amount…

Answered: Suppose that Calloway golf would like…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EB: Caduceus Company is considering the purchase of a new piece of factory equipment that will cost...

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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 $403,915.00 that will be depreciated using the 5-year MACRS schedule. The project will run for 2 years with the following forecasted numbers: Putter price Units sold COGS Selling and Administrative Year 1 What is the NPV of the project? $64.95 18,393.00 39.00% of sales 21.00% of sales Year 2 $64.95 10,084.00 39.00% of sales 21.00% 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 $136,159.00.
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 $421,096.00 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 $60.58 $60.58 Units sold 18, 005.00 10, 527.00 COGS 38.00% of sales 38.00% of sales Selling and Administrative 20.00% of sales 20.00% of sales Calloway has a 14.00% cost of capital and a 38.00% tax rate. The firm expects to sell the equipment after 2 years for a NSV of $156, 433.00. What is the project cash flow for year 2? (include the terminal cash flow here) Submit Answer format: Currency: Round to: 2 decimal places.
Caduceus Company is considering the purchase of a new piece of factory equipment that will cost $565,000 and will generate $135,000 per year for 5 years. Calculate the IRR for this piece of equipment. For further instructions on internal rate of return In Excel, see Appendix C.
Management of Ivanhoe, Inc., is considering switching to a new production technology. The cost the required equipment will be $4,000,000. The discount rate is 13 percent. The cash flows that management expects the new technology to generate as follows: Years: CF: 1-2 0 3-5 $720,000 6-9 $1,670,000 A) Compute the payback and discounted payback periods for the project B) What is the NPV for the project? Should the firm go ahead with the project? C) What is the IRR, and what would be the decision based on the IRR?
Tumer Hardware is adding a new product line that will require an investment of $1,480,000 Managers estimate that this investment will have a 10-year Me and generate net cash inflows of $330.000 the first year $270,000 the second year, and $230.000 each year thereafter for eight years. The investment has no residual value Compute the payback period Cm First enter the formula, then calculate the payback period (Round your answer to two decimal places) Full years *( Amount to complete recovery in next year Projected cash inflow in next year ) Payback years
how to calculate the market value in the table? please show details, thanks!
Coore Manufacturing has the following two possible projects. The required return is 10 percent. Project Y -$ 27,900 13,900 Project Z -$ 59,000 17,500 12,300 30,000 14,700 10,300 Year 0 1 2 3 4 15,500 28,000 a. What is the profitability index for each project? Note: Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 3- b. What is the NPV for each project? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 3. c. Which, if either, of the projects should the company accept? a. Project Y Project Z b. Project Y Project Z c. Accept project
Coore Manufacturing has the following two possible projects. The required return is 12 percent. Year Project Y Project Z 0 -$27,500 -$55,000 1 13,500 19,500 234 2 11,900 26,000 3 14,300 17,500 9,900 24,000 a. What is the profitability index for each project? (Do not round intermediate calculations and round your answers to 3 decimal places, e.g., 32.161.) b. What is the NPV for each project? (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) c. Which, if either, of the projects should the company accept? a. Project Y Project Z 1.38 ง b. Project Y 3 decimal places required. Project Z c. Accept project x
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Fancy Cat Products has a project that will cost $247,500 today and will generate monthly cash flows of $5,435 for the next 60 months. What is the rate of return of this project when expressed as an APR? Multiple Choice 13.07% 10.55% 11.75% 9.96% 11.43%
Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided manufacturing system. The annual net cash benefits and savings associated with the system are described as follows: The system will cost 9,000,000 and last 10 years. The companys cost of capital is 12 percent. Required: 1. Calculate the payback period for the system. Assume that the company has a policy of only accepting projects with a payback of five years or less. Would the system be acquired? 2. Calculate the NPV and IRR for the project. Should the system be purchasedeven if it does not meet the payback criterion? 3. The project manager reviewed the projected cash flows and pointed out that two items had been missed. First, the system would have a salvage value, net of any tax effects, of 1,000,000 at the end of 10 years. Second, the increased quality and delivery performance would allow the company to increase its market share by 20 percent. This would produce an additional annual net benefit of 300,000. Recalculate the payback period, NPV, and IRR given this new information. (For the IRR computation, initially ignore salvage value.) Does the decision change? Suppose that the salvage value is only half what is projected. Does this make a difference in the outcome? Does salvage value have any real bearing on the companys decision?
A firm in New York has USD 40 000 to invest in three projects, either Project A or Project Bor Project C. Each project runs over four years. The expected cash inflows at the end of eachyear are displayed in the table The required rate of return (discount rate) is 10% p.a.What conclusions can you draw? Are the projects equally profitable? Use the profitability index(PI).

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