please show the full calculation for the required

. What are the relevant cash flows for Sneaker 2013 and Persistence?

2. Calculate the Sneaker 2013s NPV, IRR, payback period, discounted payback, and profitability index.

3. Calculate the Persistences NPV, IRR, payback period, discounted payback, and profitability index.

4. Prepare a projected capital budgeting cash flow statement for both Sneaker 2013 and Persistence.

5. Which project; Sneaker 2013 or Persistence is better for New Balance shareholders?

6. Should Rodriguez undertake Sneaker 2013 or Persistence?

- 0 X Sneaker 2013.pdf (SECURED) - Adobe Acrobat Reader DC File Edit View Window Help Home Tools idoc.pub_sneakers.... Sneaker 2013.pdf (S... Sign In to Share Search 'Strikethrough Adobe Export PDF Convert PDF Files to Word or Excel Online billion) 22 16 14 24 1,8 0.0 Select PDF File Sneaker 2013.pdf x Convert to JPEG (.jpg) Image Quality BAB166C NOVEMBER 2014 Sneaker 2013 3. The global athletic footwear market in 2011 tataled approximately $74.5 billion and was expected to grow at a CAGR of 1.8% from 2011 to 2018, reaching $84.4 billion by 20183 Based on market research and analysis of other recent athlete endorsements, the New Balance marketing division estimated the following sales volumes for Sneaker 2013: Year 2013 2014 2015 2016 2017 2018 Pairs sold millions) 1.2 1.6 2.4 The 2016 number assumed Kirani Janses participated in the 2016 games in Rio de Janeiro, Brazil, and won at least one medal. 4. For the first two years, the introduction of Sneaker 2013 would reduce sales of existing New Balance shoes as follows: Lost sales: 2013: $35 million 2014: $15 million Assume the lost revenue had the same margins as Sneaker 2013 5. In order to produce the shoe, the firm needed to build a factory in Victram. This required an immediate outlay of $150 million, to be depreciated on a 39-year MACRS basis. Depreciation perontags for the first six years respectively were: 2.696, 5, 4.7% 4.5%, 43%, and 4.0%. The firma's analysts estimated the building would be sold for $102 million at project termination. This "salvawe valge las not been taken into consideration wben computis annual depreciation charges 6. The company must immediately purchase equipment coating S15 million. Freight and installation of the equipment would cost $5 million. The cost of equipment and freight installation was to be depreciated on a five year MACRS basis. Depreciation percentages for the six years respectively were 20%, 3246, 19%, 126, 11%, and 6%. It was believed the equipment could be sold for million upon project termination. 7. In order to manufacture Sneaker 2013, two of the firm's working capital accounts were expected to increase immediately. Approximately $15 million of inventory would be needed quickly to fill the supply chain, and accounts payable were expected to increase by $5 million. By the end of 2013, the accounts receivable balance would be 8% of project revenue; the inventory balance would be 25% of the project's variable costs and accounts payable would be 20% of the project's varsable costs. All working capital would be recovered at the end of the project by the end of the sixth year Medium Convert Create PDF Edit PDF = Comment Convert and edit PDES with Acrobat Pro DC Start Free Trial 8. Variable costs were expected to be 55% of revenue. Type here to search O B X Sneaker 2013 lt W. e 19 Sneaker 2013.pdf (... w New Microsoft Wor.. A ENG S54 AM USIA 11/29/2019 - 0 X Sneaker 2013.pdf (SECURED) - Adobe Acrobat Reader DC File Edit View Window Help Home Tools idoc.pub_sneakers.... Sneaker 2013.pdf (5... X Sign In to Share Search 'Strikethrough 9. Selling general, and administrative expenses were expected to be $7 million per year. 10. Kirani James would be paid $2 million per year for his endorsement of Sneaker 2013. with an additional $1 million Olymapec bonus in 2016. 11. Other advertising and promotion costs were estimated as follows: Year 2013 2014 2015 2016 2017 2018 A&P Expense (millions) $25 $15 $10 $30 $25 $15 Adobe Export PDF Convert PDF Files to Word or Excel Online 12. New Balance had already spent S2 million in research and development ou Sneaker 2013- Select PDF File Sneaker 2013.pdf x Convert to 13. The Sneaker 2013 project was to be fianced using a combination of equity and debt. The interest costs on the debt were expected to be approximately $1.2 million per year. The New Balance discount rate for new projects such as this was 11%. 14. New Balance's effective tax rate was 40%. Rodriguez was worried about the marketing approach for Sneaker 2013 targeting 12- to 18- year-old males. Recent market data showed the average age of athletic footwear purchasers to be just over 27 years, up from 24 three years earlier. This trend was expected to continue as the population aged. Success would depend on an effective marketing and advertising campaign wliicla targeted not only the younger consumer, but which reached the ultimate purchaser who was more likely to be a parent. JPEG (.jpg) Image Quality Medium Persistence Convert Create PDF Edit PDF Rodriguez was still contemplating the Sneaker 2013 project when she beran reviewing another proposal for a new hiking shoe being considered. The hiking shoe would be named Persistence. The hiking and active walking sector was one of the fastest growing areas of the footwear industry and one they had not yet entered. She was confident that liling shoes would be the newest footwear trend in the coming decade. The target market for this shoe would be men and women in the 25-to 40-year-old are category. The business case for the building sloe needed some work; but after preliminary analysis, slie focused on the following information: 1 The life of the Persistence project would be only three years, given the steep technological learning curve for this new product line. 2 The wholesale price of Persistence (net to New Balance) would be $90.00. 3. The hikineserment of the athletic shoe market was projected to reach $350 million during 2013, and it was growing al arale ol 15% per year. New Balance's market sbare projections for Persistence were: 2013. 1596. 2014, 18%, and 2015. 20%. = Comment Convert and edit PDES with Acrobat Pro DC Start Free Trial Type here to search o Sneaker 2013 It W. e 49 Sneaker 2013.pdf .. w New Microsoft Wor.. A ENG S54 AM USIA 11/29/2019 - 0 X Sneaker 2013.pdf (SECURED) - Adobe Acrobat Reader DC File Edit View Window Help Home Tools idoc.pub_sneakers.... Sneaker 2013.pdf (S... Sign In to Share Search 'Strikethrough RAB1660 NOVT MER 2014 Sneaker 2013 4. The firm would be able to use an idle section of one of its factories to produce the laking sloe. A cost accountant estimated that, according to the square footage in the factory, this section's pretbead allocation would amount to $18 million per year The firm would still acur these costs if the product were not undertaken. In addition, this section would remain idle for the life of the project if the Persistence project were not undertaken. Adobe Export PDF Convert PDF Files to Word or Excel Online Select PDF File Sneaker 2013.pdf X Convert to JPEG (.jpg) Image Quality Medium 5. The firm must purchase manufacturing equipment costing $8 million. The equipment Lell into the live-year MACRS depreciation calegory. Depreciation percentages for the first three years respectively were: 20%.32%, and 19%. The casla outlay would be at Tune O. and depreciation would start in 2013. malysts estimated the equipment could be sold for book value at the end of the project's life 6. Inventory and accounts receivable would increase by $25 million at Time o and would be recovered at the end of the project (2015). The accounts payable balance was projected to increase by Sio million a Time and would also be recovered at the end of the project. 7. Because the form liad not yet entered the hiking shoe wartet, introduction of this product was not expected to impact sales of the firm's other shoe lines. 8. Variable costs of producing the shoe were expected to be 38% of llae sloe's sales. 9. Gelleral and adinistrative expenses lor Persistence would be 12% of revenue in 2013. This would drop to 10% in 2014 and 896 in 2015. 10. The product would not have a celebrity endorser. Advertising and promotion costs would intially be $3 million in 2013, then $2 million in botla 2014 and 2015. 11. The company's federal plus state marginal tax rate was 40%. 12. In order to begin immediate production of Persistence, the design technology and the manufacturing specifications for a new hiking she would be purchased from an outside source for $50 million. This outlay was to take place immediately and be expensed immediately for tax purposes. 13. Annual interest costs on the debt for this project would be $600,000. In addition, Rodriguez estimated the cost of capital for the hiking shoe would be 14%. Convert Create PDF Uswami Edit PDF = Comment Convert and edit PDES with Acrobat Pro DC Start Free Trial Type here to search o Sneaker 2013 W. e Seaker 2013.pdf (.. w New Microsoft Wor.. A ENG S54 AM USIA 11/29/2019 - 0 X Sneaker 2013.pdf (SECURED) - Adobe Acrobat Reader DC File Edit View Window Help Home Tools idoc.pub_sneakers.... Sneaker 2013.pdf (S... Sign In to Share Search 'Strikethrough Adobe Export PDF Convert PDF Files to Word or Excel Online billion) 22 16 14 24 1,8 0.0 Select PDF File Sneaker 2013.pdf x Convert to JPEG (.jpg) Image Quality BAB166C NOVEMBER 2014 Sneaker 2013 3. The global athletic footwear market in 2011 tataled approximately $74.5 billion and was expected to grow at a CAGR of 1.8% from 2011 to 2018, reaching $84.4 billion by 20183 Based on market research and analysis of other recent athlete endorsements, the New Balance marketing division estimated the following sales volumes for Sneaker 2013: Year 2013 2014 2015 2016 2017 2018 Pairs sold millions) 1.2 1.6 2.4 The 2016 number assumed Kirani Janses participated in the 2016 games in Rio de Janeiro, Brazil, and won at least one medal. 4. For the first two years, the introduction of Sneaker 2013 would reduce sales of existing New Balance shoes as follows: Lost sales: 2013: $35 million 2014: $15 million Assume the lost revenue had the same margins as Sneaker 2013 5. In order to produce the shoe, the firm needed to build a factory in Victram. This required an immediate outlay of $150 million, to be depreciated on a 39-year MACRS basis. Depreciation perontags for the first six years respectively were: 2.696, 5, 4.7% 4.5%, 43%, and 4.0%. The firma's analysts estimated the building would be sold for $102 million at project termination. This "salvawe valge las not been taken into consideration wben computis annual depreciation charges 6. The company must immediately purchase equipment coating S15 million. Freight and installation of the equipment would cost $5 million. The cost of equipment and freight installation was to be depreciated on a five year MACRS basis. Depreciation percentages for the six years respectively were 20%, 3246, 19%, 126, 11%, and 6%. It was believed the equipment could be sold for million upon project termination. 7. In order to manufacture Sneaker 2013, two of the firm's working capital accounts were expected to increase immediately. Approximately $15 million of inventory would be needed quickly to fill the supply chain, and accounts payable were expected to increase by $5 million. By the end of 2013, the accounts receivable balance would be 8% of project revenue; the inventory balance would be 25% of the project's variable costs and accounts payable would be 20% of the project's varsable costs. All working capital would be recovered at the end of the project by the end of the sixth year Medium Convert Create PDF Edit PDF = Comment Convert and edit PDES with Acrobat Pro DC Start Free Trial 8. Variable costs were expected to be 55% of revenue. Type here to search O B X Sneaker 2013 lt W. e 19 Sneaker 2013.pdf (... w New Microsoft Wor.. A ENG S54 AM USIA 11/29/2019 - 0 X Sneaker 2013.pdf (SECURED) - Adobe Acrobat Reader DC File Edit View Window Help Home Tools idoc.pub_sneakers.... Sneaker 2013.pdf (5... X Sign In to Share Search 'Strikethrough 9. Selling general, and administrative expenses were expected to be $7 million per year. 10. Kirani James would be paid $2 million per year for his endorsement of Sneaker 2013. with an additional $1 million Olymapec bonus in 2016. 11. Other advertising and promotion costs were estimated as follows: Year 2013 2014 2015 2016 2017 2018 A&P Expense (millions) $25 $15 $10 $30 $25 $15 Adobe Export PDF Convert PDF Files to Word or Excel Online 12. New Balance had already spent S2 million in research and development ou Sneaker 2013- Select PDF File Sneaker 2013.pdf x Convert to 13. The Sneaker 2013 project was to be fianced using a combination of equity and debt. The interest costs on the debt were expected to be approximately $1.2 million per year. The New Balance discount rate for new projects such as this was 11%. 14. New Balance's effective tax rate was 40%. Rodriguez was worried about the marketing approach for Sneaker 2013 targeting 12- to 18- year-old males. Recent market data showed the average age of athletic footwear purchasers to be just over 27 years, up from 24 three years earlier. This trend was expected to continue as the population aged. Success would depend on an effective marketing and advertising campaign wliicla targeted not only the younger consumer, but which reached the ultimate purchaser who was more likely to be a parent. JPEG (.jpg) Image Quality Medium Persistence Convert Create PDF Edit PDF Rodriguez was still contemplating the Sneaker 2013 project when she beran reviewing another proposal for a new hiking shoe being considered. The hiking shoe would be named Persistence. The hiking and active walking sector was one of the fastest growing areas of the footwear industry and one they had not yet entered. She was confident that liling shoes would be the newest footwear trend in the coming decade. The target market for this shoe would be men and women in the 25-to 40-year-old are category. The business case for the building sloe needed some work; but after preliminary analysis, slie focused on the following information: 1 The life of the Persistence project would be only three years, given the steep technological learning curve for this new product line. 2 The wholesale price of Persistence (net to New Balance) would be $90.00. 3. The hikineserment of the athletic shoe market was projected to reach $350 million during 2013, and it was growing al arale ol 15% per year. New Balance's market sbare projections for Persistence were: 2013. 1596. 2014, 18%, and 2015. 20%. = Comment Convert and edit PDES with Acrobat Pro DC Start Free Trial Type here to search o Sneaker 2013 It W. e 49 Sneaker 2013.pdf .. w New Microsoft Wor.. A ENG S54 AM USIA 11/29/2019 - 0 X Sneaker 2013.pdf (SECURED) - Adobe Acrobat Reader DC File Edit View Window Help Home Tools idoc.pub_sneakers.... Sneaker 2013.pdf (S... Sign In to Share Search 'Strikethrough RAB1660 NOVT MER 2014 Sneaker 2013 4. The firm would be able to use an idle section of one of its factories to produce the laking sloe. A cost accountant estimated that, according to the square footage in the factory, this section's pretbead allocation would amount to $18 million per year The firm would still acur these costs if the product were not undertaken. In addition, this section would remain idle for the life of the project if the Persistence project were not undertaken. Adobe Export PDF Convert PDF Files to Word or Excel Online Select PDF File Sneaker 2013.pdf X Convert to JPEG (.jpg) Image Quality Medium 5. The firm must purchase manufacturing equipment costing $8 million. The equipment Lell into the live-year MACRS depreciation calegory. Depreciation percentages for the first three years respectively were: 20%.32%, and 19%. The casla outlay would be at Tune O. and depreciation would start in 2013. malysts estimated the equipment could be sold for book value at the end of the project's life 6. Inventory and accounts receivable would increase by $25 million at Time o and would be recovered at the end of the project (2015). The accounts payable balance was projected to increase by Sio million a Time and would also be recovered at the end of the project. 7. Because the form liad not yet entered the hiking shoe wartet, introduction of this product was not expected to impact sales of the firm's other shoe lines. 8. Variable costs of producing the shoe were expected to be 38% of llae sloe's sales. 9. Gelleral and adinistrative expenses lor Persistence would be 12% of revenue in 2013. This would drop to 10% in 2014 and 896 in 2015. 10. The product would not have a celebrity endorser. Advertising and promotion costs would intially be $3 million in 2013, then $2 million in botla 2014 and 2015. 11. The company's federal plus state marginal tax rate was 40%. 12. In order to begin immediate production of Persistence, the design technology and the manufacturing specifications for a new hiking she would be purchased from an outside source for $50 million. This outlay was to take place immediately and be expensed immediately for tax purposes. 13. Annual interest costs on the debt for this project would be $600,000. In addition, Rodriguez estimated the cost of capital for the hiking shoe would be 14%. Convert Create PDF Uswami Edit PDF = Comment Convert and edit PDES with Acrobat Pro DC Start Free Trial Type here to search o Sneaker 2013 W. e Seaker 2013.pdf (.. w New Microsoft Wor.. A ENG S54 AM USIA 11/29/2019