The objective of this case is for the students to apply their skills in capital budgeting and project analysis. Michelle Rodriguez of New Balance has reached out to you for assistance on her latest assignment. Prepare a 2-4 page memo analyzing the viability of two projects, Sneaker 2013 and Persistence. The memo should use single spacing, 12-point font, and one inch margins.

Address the following issues:

1. Produce a projected capital budgeting cash flow statement for the Sneaker 2013 project by answering the following:

a. What is the projects initial (year 0) investment outlay?

b. What are the projects annual (years 2013-2018) net operating cash flows?

c. What is the projects terminal (2018) non-operating net cash flow?

d. Does Sneaker 2013 appear viable from a quantitative standpoint? To answer this question, estimate the projects payback, net present value, and internal rate of return.

2. Produce a projected capital budgeting cash flow statement for the Persistence project by answering the following:

a. What is the projects initial (year 0) investment outlay?

b. What are the projects annual (years 2013-2018) net operating cash flows?

c. What is the projects terminal (2018) non-operating net cash flow?

d. Does Sneaker 2013 appear viable from a quantitative standpoint? To answer this question, estimate the projects payback, net present value, and internal rate of return.

3. Which project do you think is more risky? How do you think you should incorporate differences in risk into your analysis?

4. Based on the calculated payback period, net present value, and internal rate of return for each project, which project looks better for New Balance shareholders? Why?

5. What is your final recommendation to Rodriguez?

Please answer the 5 questions!

It was 6:35 p.m. on a Friday as Michelle Rodriguez held her head in her hands and sought to regain focus. Her company, New Balance, based in Brighton, Massachusetts, had recently implemented a policy on work-life balance. She had just made the mistake of opening an email from the senior VP of product development, Monte Holliday, who needed a position report by Monday morning on one of New Balance's most promising new athletic shoes. On the heels of the 2012 London Olympics, New Balance saw an opportunity in the 12- to 18-year-old male segment of the market, which their larger competitors had ignored. Established, well-known Olympic athletes like Usain Bolt already had multi-million dollar endorsement deals for athletic footwear, and they dominated the age 18 to 24 male market for running shoes." New Balance did not have the resources or the star power to compete in this segment. However, New Balance saw an opportunity to target a younger consumer if they could craft an effective marketing and advertising campaign around the right athlete. Holliday and New Balance CEO Jim Davis had just returned from London after holding preliminary meetings with several potential new endorsers. The most promising was a 19-year-old phenomenon from Grenada named Kirani James. By winning gold in the 40o-meter dash in London, James became the first runner from outside the United States to win the event in more than three decades. With a winning time of 43.94 seconds, he was also the first non-U.S. runner to finish the 40o under 44 seconds. James's victory was a huge feat for his country. Grenada had never won any Olympic medal, much less gold, and he returned home to a hero's welcome. His relative youth, and the fact that many It was 6:35 p.m. on a Friday as Michelle Rodriguez held her head in her hands and sought to regain focus. Her company, New Balance, based in Brighton, Massachusetts, had recently implemented a policy on work-life balance. She had just made the mistake of opening an email from the senior VP of product development, Monte Holliday, who needed a position report by Monday morning on one of New Balance's most promising new athletic shoes. On the heels of the 2012 London Olympics, New Balance saw an opportunity in the 12- to 18-year-old male segment of the market, which their larger competitors had ignored. Established, well-known Olympic athletes like Usain Bolt already had multi-million dollar endorsement deals for athletic footwear, and they dominated the age 18 to 24 male market for running shoes." New Balance did not have the resources or the star power to compete in this segment. However, New Balance saw an opportunity to target a younger consumer if they could craft an effective marketing and advertising campaign around the right athlete. Holliday and New Balance CEO Jim Davis had just returned from London after holding preliminary meetings with several potential new endorsers. The most promising was a 19-year-old phenomenon from Grenada named Kirani James. By winning gold in the 40o-meter dash in London, James became the first runner from outside the United States to win the event in more than three decades. With a winning time of 43.94 seconds, he was also the first non-U.S. runner to finish the 40o under 44 seconds. James's victory was a huge feat for his country. Grenada had never won any Olympic medal, much less gold, and he returned home to a hero's welcome. His relative youth, and the fact that many