Produce a detailed free cash flow statement for the Sneaker 13 project and calculate the NPV and IRR for the project. Use a table similar to the one provided in the template on page 4 of this assignment for your calculations and make any necessary adjustments. Express all \$-amounts in millions of dollars and round to two decimals. Question 5 ( 5 points) The sales projections for the Sneaker 13 project assume that Kirani James will participate in the 2016 Olympics and win at least one medal. Suppose that if Kirani James does not end up winning a medal in the 2016 Olympic Games the sales forecast would be as displayed in the table below. What would the NPV of the project be under this alternative? - Assume that New Balance is profitable enough so that if a project has an operating loss in any given year, the company can offset profits from other divisions with that loss. In other words, assume the project gets a tax benefit whenever it has negative EBIT. For the Persistence Project: Assume that the factory space used for production could be rented out for $250,000 per year if the project would not be taken. Use Excel (or equivalent) for all your calculations and to create the tables showing your valuation results for Questions 4 and 6. - For you valuation tables, please use a layout similar to the one provided in the template on page 4 of this assignment for your calculations. Note that the template on page 4 may not be complete. If you feel like additional items (e.g. opportunity costs, project externalities, or liquidation values) need to be included, add them as separate line items in the appropriate place. Express all \$amounts in millions of dollars and round to two decimals. - Please be mindful of the quality of the presentation of your report and make your tables fit on one page. Choosing a slightly smaller font size as well as Word's "Auto Fit to Page" feature can help you with this. Additionally, you may present the tables in landscape format if necessary. - If your write-up has several pages, please staple them together. Template for Project Analysis Which of the following should be included in the free cash flow projections for Sneaker 13 ? Briefly explain why or why not. a) The research and development costs of $2 million b) The interest costs on debt from financing the project of $1.2 million per year c) The reduction in sales of existing new balance shoes d) The costs of Kirani James' endorsement and the Olympic Bonus e) The salvage value of the factory at the end of the project Question 2 (5 points) For the Sneaker 13 project: calculate the after-tax cash flow that will result from the sale of the equipment (salvage / liquidation value) by completing the following steps: 1. Determine the equipment's market value at the end of the project 2. Determine the book value of the equipment at the end of the project 3. Calculate the gain/loss on the sale 4. Calculate the after-tax cash flow from the sale of the equipment Question 3 (5 points) For the Sneaker 13 project: calculate the after-tax cash flow that will result from the sale of the factory by completing the following steps: 1. Determine the factory's market value at the end of the project 2. Determine the book value of the factory at the end of the project 3. Calculate the gain/loss on the sale 4. Calculate the after-tax cash flow from the sale of the factory Which of the following should be included in the free cash flow projections for the Persistence project? Briefly explain why or why not. a) The $1.8 million in fixed overhead expenses allocated to the project b) The rental income from the factory if the project were not taken c) The cost of $50 million for the design technology d) Advertising and promotion costs e) The annual interest cost of $600,000 on the debt used to finance this project Question 7 (15 points) Produce a detailed free cash flow statement for the Persistence project and calculate the NPV and IRR. Use a table similar to the one provided in the template on page 4 of this assignment for your calculations and make any necessary adjustments. Express all \$-amounts in millions of dollars and round to two decimals. Question 8 (5 points) The valuation of the Persistence project hinges strongly on the assumption that New Balance will be able to capture a large market share with this project. How would the NPV of the project change, if instead New Balance's market share were as displayed in the table below? Question 9 ( 5 points) Assume that New Balance can only choose one of the two projects. Based on your calculations from Questions 4 and 7 which project should New Balance take? Briefly explain why. Produce a detailed free cash flow statement for the Sneaker 13 project and calculate the NPV and IRR for the project. Use a table similar to the one provided in the template on page 4 of this assignment for your calculations and make any necessary adjustments. Express all \$-amounts in millions of dollars and round to two decimals. Question 5 ( 5 points) The sales projections for the Sneaker 13 project assume that Kirani James will participate in the 2016 Olympics and win at least one medal. Suppose that if Kirani James does not end up winning a medal in the 2016 Olympic Games the sales forecast would be as displayed in the table below. What would the NPV of the project be under this alternative? - Assume that New Balance is profitable enough so that if a project has an operating loss in any given year, the company can offset profits from other divisions with that loss. In other words, assume the project gets a tax benefit whenever it has negative EBIT. For the Persistence Project: Assume that the factory space used for production could be rented out for $250,000 per year if the project would not be taken. Use Excel (or equivalent) for all your calculations and to create the tables showing your valuation results for Questions 4 and 6. - For you valuation tables, please use a layout similar to the one provided in the template on page 4 of this assignment for your calculations. Note that the template on page 4 may not be complete. If you feel like additional items (e.g. opportunity costs, project externalities, or liquidation values) need to be included, add them as separate line items in the appropriate place. Express all \$amounts in millions of dollars and round to two decimals. - Please be mindful of the quality of the presentation of your report and make your tables fit on one page. Choosing a slightly smaller font size as well as Word's "Auto Fit to Page" feature can help you with this. Additionally, you may present the tables in landscape format if necessary. - If your write-up has several pages, please staple them together. Template for Project Analysis Which of the following should be included in the free cash flow projections for Sneaker 13 ? Briefly explain why or why not. a) The research and development costs of $2 million b) The interest costs on debt from financing the project of $1.2 million per year c) The reduction in sales of existing new balance shoes d) The costs of Kirani James' endorsement and the Olympic Bonus e) The salvage value of the factory at the end of the project Question 2 (5 points) For the Sneaker 13 project: calculate the after-tax cash flow that will result from the sale of the equipment (salvage / liquidation value) by completing the following steps: 1. Determine the equipment's market value at the end of the project 2. Determine the book value of the equipment at the end of the project 3. Calculate the gain/loss on the sale 4. Calculate the after-tax cash flow from the sale of the equipment Question 3 (5 points) For the Sneaker 13 project: calculate the after-tax cash flow that will result from the sale of the factory by completing the following steps: 1. Determine the factory's market value at the end of the project 2. Determine the book value of the factory at the end of the project 3. Calculate the gain/loss on the sale 4. Calculate the after-tax cash flow from the sale of the factory Which of the following should be included in the free cash flow projections for the Persistence project? Briefly explain why or why not. a) The $1.8 million in fixed overhead expenses allocated to the project b) The rental income from the factory if the project were not taken c) The cost of $50 million for the design technology d) Advertising and promotion costs e) The annual interest cost of $600,000 on the debt used to finance this project Question 7 (15 points) Produce a detailed free cash flow statement for the Persistence project and calculate the NPV and IRR. Use a table similar to the one provided in the template on page 4 of this assignment for your calculations and make any necessary adjustments. Express all \$-amounts in millions of dollars and round to two decimals. Question 8 (5 points) The valuation of the Persistence project hinges strongly on the assumption that New Balance will be able to capture a large market share with this project. How would the NPV of the project change, if instead New Balance's market share were as displayed in the table below? Question 9 ( 5 points) Assume that New Balance can only choose one of the two projects. Based on your calculations from Questions 4 and 7 which project should New Balance take? Briefly explain why