In addition to the previous risk analysis, are there any externalities NIIIKE Designs should consider? *No calculations are necessary. Consider only conceptual issues*

tructions: Complete the following mini-case. Submit a Word document that answers questions and an Excel spreadsheet that supports all your calculations. A template from class lecture maybe used. Fashion House, NIIIKE Designs recently hired you as an assistant to the CFO. Your first task is evaluating whether NIIIKE should expand by developing a new basketball shoe line using college basketball stars. Your research reflects the following information: - You expect the proposed project to span the next five years. - Current estimates indicate sales will be 200,000 units in year one, with 15% sales growth over the following 2 years and 7% growth in the final 2 years. - The unit price in Year 1 is $75. Given estimated demand and inflationary pressure, prices are expected to rise by 5% each subsequent year. - The project requires purchasing new equipment worth $50 million after installation. The new equipment is state-of-the-art, so you expect to be able to sell it for $1 million when the project ends. - As a result of the project, current assets would increase by $750,000, and payables would increase by $450,000. - The new equipment falls into the MACRS 7-year class, so the applicable rates are 14.29%,24.49%,17.49%,12.49%,8.93%,8.92%,8.93%, and 4.46% in each successive year. - Variable costs are estimated to be 25% of the unit price for each year. They will be added along with the number of units sold. No economies of scale. - Fixed costs, excluding depreciation, are estimated at $2,500,000 per year - The state-plus-federal tax rate is 25%, - WACC is 12%. Intial Investment 50,000,000 Salvage 6,538,750 NOWC 1,200,000 1,200,000 CF from Project 51,200,0008,348,75011,374,53112,613,60013,507,94022,508,668 NPV 4,343,378.29 31 IRR 9% 32 MIRR Payback Period 4.40 PI 0.92