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a. A fashion brand is considering the hiring of a new brand ambassador for its new collection. The company believes that after the ambassador is

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a. A fashion brand is considering the hiring of a new brand ambassador for its new collection. The company believes that after the ambassador is hired, in year 1, the demand for their product will grow in subsequent years at the rate of 5% per year. Assume that demand in the first year is $20,000. Thus, demand in year 2 will be $20,000*(1+.05). The brand ambassador is paid $45,000 upfront (time () and an additional yearly payment of $10,000. Assume the MARR is 6%. Will the hiring cost be justified for a 5-year campaign? (15 points) b. Management is debating another alternative: opening a franchise store near the UT campus. The construction costs, at time 0, will be $100,000 followed by $25,000 annual maintenance costs beginning in year 1. The franchise revenue at year 1 is expected be $90,000 but will decrease steadily by $20,000 per year as the hype of the new store fades. Assume the MARR = 6%. Which investment, brand ambassador or franchise, is more attractive for the 5-year planning period? Draw a cash flow diagram. (15 points) a. A fashion brand is considering the hiring of a new brand ambassador for its new collection. The company believes that after the ambassador is hired, in year 1, the demand for their product will grow in subsequent years at the rate of 5% per year. Assume that demand in the first year is $20,000. Thus, demand in year 2 will be $20,000*(1+.05). The brand ambassador is paid $45,000 upfront (time () and an additional yearly payment of $10,000. Assume the MARR is 6%. Will the hiring cost be justified for a 5-year campaign? (15 points) b. Management is debating another alternative: opening a franchise store near the UT campus. The construction costs, at time 0, will be $100,000 followed by $25,000 annual maintenance costs beginning in year 1. The franchise revenue at year 1 is expected be $90,000 but will decrease steadily by $20,000 per year as the hype of the new store fades. Assume the MARR = 6%. Which investment, brand ambassador or franchise, is more attractive for the 5-year planning period? Draw a cash flow diagram. (15 points)

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