KKHeffner02
11.03.2020 •
Business
Sunk costs and opportunity costs Masters Golf Products, Inc., spent 3 years and $ 1 comma 090 comma 000 to develop its new line of club heads to replace a line that is becoming obsolete. To begin manufacturing them, the company will have to invest $ 1 comma 820 comma 000 in new equipment. The new clubs are expected to generate an increase in operating cash inflows of $ 741 comma 000 per year for the next 12 years. The company has determined that the existing line could be sold to a competitor for $ 249 comma 000. a. How should the $ 1 comma 090 comma 000 in development costs be classified? b. How should the $ 249 comma 000 sale price for the existing line be classified? c. What are all the relevant cash flows for years 0 thru 12? (Note: Assume that all of these numbers are net of taxes.)
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