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 $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 $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 $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.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...
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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.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5fb98ea3-0f1d-40f9-8e20-721b66ee7bd5%2Fb6b29fb5-7119-432c-8bdb-c17f3456224c%2Fk5oqltq_processed.png&w=3840&q=75)
Transcribed Image Text: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.
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