Sunk costs and opportunity costs Masters Golf Products, Inc., spent 44 years and $,1180,000to 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 $1,800,000 in new equipment. The new clubs are expected to generate an increase in operating cash inflows of $745,000 per year for the next 15 years. The company has determined that the existing line could be sold to a competitor for $255,000.
a. How should the $1,180,000 in development costs beclassified?
b. How should the $255,000 sale price for the existing line beclassified?
c. What are all the relevant cash flows for years 0 through 15? (Note: Assume that all of these numbers are net of taxes.) Get Finance homework help today