Based on the assumption chart, would you recommend going ahead with the Sneaker 2013 project? Explain why or why not?

Please consider the following factors, issues, and concerns listed below when making your recommendation.

• The length of time the new Sneaker 2013 line will cannibalize the sales of existing footwear.
• The total cost of cannibalization.
• The cost per year for the Kirani James endorsement.

SNEAKER 2013-Assumption Chart & Six Year Cash Flow Projections ($ millions) Cash Outlay 2013 2014 2015 2016 2017 2018 MV 0.90 1.40 $115.0 2.40 $115.0 1.80 $115.0 $115.0 Sales (millions of pairs) Price/pair Cannibalization Var costs (% of revenue) SG&A Expenses Endorsement Other advertising & promotion A/R (% of net revenue) Inventory (% of var costs) A/P % of var costs) Factory Expansion Equipment Freight & Installation Inventory A/P Tax Rate Factory MV (6 year) Equipment MV (6 year) 1.20 $115.0 $35.0 55% $7.0 $2.0 $25.0 8% 25% 20% 1.60 $115.0 $15.0 55% $7.0 $2.0 $15.0 8% 25% 20% 55% $7.0 $2.0 $10.0 8% 25% 20% 55% $7.0 $3.0 $30.0 8% 25% 20% 55% $7.0 $2.0 $25.0 8% 25% 20% 55% $7.0 $2.0 $15.0 0% 0% 0% $150.0 $15.0 $5.0 $15.0 $5.0 40.0% $102.0 $3.0 SNEAKER 2013-Assumption Chart & Six Year Cash Flow Projections ($ millions) Cash Outlay 2013 2014 2015 2016 2017 2018 MV 0.90 1.40 $115.0 2.40 $115.0 1.80 $115.0 $115.0 Sales (millions of pairs) Price/pair Cannibalization Var costs (% of revenue) SG&A Expenses Endorsement Other advertising & promotion A/R (% of net revenue) Inventory (% of var costs) A/P % of var costs) Factory Expansion Equipment Freight & Installation Inventory A/P Tax Rate Factory MV (6 year) Equipment MV (6 year) 1.20 $115.0 $35.0 55% $7.0 $2.0 $25.0 8% 25% 20% 1.60 $115.0 $15.0 55% $7.0 $2.0 $15.0 8% 25% 20% 55% $7.0 $2.0 $10.0 8% 25% 20% 55% $7.0 $3.0 $30.0 8% 25% 20% 55% $7.0 $2.0 $25.0 8% 25% 20% 55% $7.0 $2.0 $15.0 0% 0% 0% $150.0 $15.0 $5.0 $15.0 $5.0 40.0% $102.0 $3.0