Louisville Slugger

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Louisville Slugger The Louisville Slugger baseball bat began over 120 years ago in the talented hands of 17-year-old John A. “Bud” Hillerich. Bud, whose father owned a woodworking shop, left work one afternoon to watch Louisville’s major league team, the Louisville Eclipse, and his favorite player, Pete Browning. During the game, Browning, who was struggling through a long hitting slump, broke his bat. Following the game, Bud met Browning and invited him to his father’s shop to make him a new bat. With Browning’s assistance, Bud handcrafted a new bat for Browning from a single piece of wood. Browning got three hits with it the next day and the “Louisville Slugger” was born. Since that time, baseball legends like Babe Ruth and…show more content…
Louisville Slugger can produce the Exogrid for $145 each in variable costs and estimated fixed costs of $3 million per year. According to Louisville Slugger’s marketing study, which cost the company $225,000, the company’s estimated sales volume in Exogrid bats for the next six years may be seen by the chart below: |YEAR |SALES VOLUME | |Year 1 |75,000 | |Year 2 |125,000 | |Year 3 |50,000 | |Year 4 |90,000 | |Year 5 |80,000 | |Year 6 |65,000 | Louisville Slugger expects to sell the Exogrid for $350 per bat for the first three years and a discounted $300 per bat for Years 4, 5, and 6. The cost of the equipment to manufacture the Exogrid is $25 million and will be depreciated on a seven-year MACRS schedule. The value of the equipment used to manufacture the Exogrid in six years will be $3.5 million. Louisville Slugger has a 40 percent corporate tax rate and a 12 percent required return. You are employed in Louisville Slugger’s finance department and are head of the capital budgeting team. The CEO of Louisville Slugger has asked you to prepare a brief report on the profitability of producing the Exogrid. In
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