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Under Armour, Inc. Capital Budgeting Analysis Executive Briefing Students: Hal Stein and Olivia Blankenship Keller Graduate School of Management FI515 - Managerial Finance Professor: Gene Smith Date: February 16, 2017 Version 1.0 Draft Agenda Students: Hal Stein and Olivia Blankenship Keller Graduate School of Management FI515 - Managerial Finance Date: February 16, 2017 Version 1.0 Draft Cost of Project Calculations - Analysis Cash Flow Estimations - EBIT ( 12 years) - Analysis Capital Budgeting - Net Present Value - Internal Rate of Return - Discounted Payback Period Summary References Page 2 of 12 Property Plant & Equipment property plant and equipment value of new PPE annual depreciation book value changes after 10% investment 538,531 592384.1 53,853 4263.370417 Straight line depreciation provide for depreciation charged to an asset evenly throughout its useful life. Depreciation per annum= (cost-residual value) Useful life Rate of depreciation= 1 *100% Useful Life Financial Data Students: Hal Stein and Olivia Blankenship Keller Graduate School of Management FI515 - Managerial Finance Date: February 16, 2017 Version 1.0 Draft Estimation of Free Cash Flows The FCF provides a representation of the financial flexibility of the company. This means that the organization is able to take advantage of different investments that are above the planned investments. Note: Source data taken from Yahoo Finance (n.d.). Page 7 of 12 Project Effectiveness Net Present Value NPV year 1 2 3 4 5 6 7 8 9 10 11 12 total initial outlay Students: Hal Stein and Olivia Blankenship Keller Graduate School of Management FI515 - Managerial Finance Date: February 16, 2017 Version 1.0 Draft discounting 45638.13559 38676.3861 32776.59839 27776.77829 23539.64262 19948.84968 16905.80481 14326.95323 12141.48579 10289.39474 8719.826048 7389.683092 258129.5384 -53,853 Page 8 of 12 Project Effectiveness Internal Rate of Return IRR year 0 1 2 3 4 5 6 7 8 9 10 11 12 discounting reducing the NPV -53853 -53853 45638.13559 33658.125 38676.3861 21036.32813 32776.59839 13147.70508 27776.77829 8217.315674 23539.64262 5135.822296 19948.84968 3209.888935 16905.80481 2006.180584 14326.95323 1253.862865 12141.48579 783.6642908 10289.39474 489.7901817 8719.826048 306.1188636 7389.683092 191.3242897 Students: Hal Stein and Olivia Blankenship Keller Graduate School of Management FI515 - Managerial Finance Date: February 16, 2017 Version 1.0 Draft -53853 39891.11111 14917.72853 7851.436069 4132.334773 2174.913039 1144.691073 602.4689858 317.0889399 166.8889157 87.83627143 46.22961654 24.33137713 Note: Source data taken from S&P 500 (2017). where: Ct = net cash inflow during the period t Co= total initial investment costs r = discount rate, and t = number of time periods Using this formula IRR 90% Page 9 of 12 Project Effectiveness Discounted Payback Period Discounted payback period year discounting 0 -53,853 1 45638.13559 2 38676.3861 3 32776.59839 4 27776.77829 5 23539.64262 6 19948.84968 7 16905.80481 8 14326.95323 9 12141.48579 10 10289.39474 11 8719.826048 12 7389.683092 total -53,853 The project provides a payment of the total initial investment on the second year of it operations providing a surplus of 30,462 on the same year 84314.52169 204,277 Students: Hal Stein and Olivia Blankenship Keller Graduate School of Management FI515 - Managerial Finance Date: February 1262017 Version 1.0 Draft 30,462 Page 10 of 12 Summary Students: Hal Stein and Olivia Blankenship Keller Graduate School of Management FI515 - Managerial Finance Date: February 16, 2017 Version 1.0 FINAL Validity of Results Page 11 of 12 References Students: Hal Stein and Olivia Blankenship Keller Graduate School of Management FI515 - Managerial Finance Date: February 12, 2017 Version 1.0 FINAL Morningstar, Inc. (2017). Morningstar. Under Armour Inc A (UAA). Retrieved February 8, 2017, from http:// quicktake.morningstar.com/StockNet/bonds.aspx?Symbol=U AA&Country=USA Page 12 of 12