You will model out the first five years of the store (Years 0 - 5).

a) You can assume that these stores are higher risk than traditional NKE products, so take your WACC from Part 1 and add 4% to it. If you don't like your WACC, use 6.3%.

b) Your team estimates that each store location will cost NKE $5,500,000 in initial construction costs (Year 0). They have also spent $350,000 consulting with architects and a marketing group the past two years. Assume that you can depreciate any costs using straight-line depreciation over 20 years.

c) We are going to model this on a per-customer basis. Let's assume that the store has 8,000 customers making purchases in the first year. Customers then grow by 2.5% per year, starting in the second year. The average purchase per customer is $250 in the first year. You expect this will grow by 3.5% per year, starting in the second year. The number of customers per year times the average purchase is the store's projected revenue in that year.

d) You estimate that the average COGS per purchase in the first year will be $55. Because of NKE's supply chain expertise, COGS will increase by only 1% per year, also starting in the second year.

f) Fixed operating costs (excluding depreciation) are $550,000 a year for this location. Let's keep those constant across the five years.

g) Assume that the store requires upfront working capital of $125,000. This is not recovered.

g) Assume a tax rate of 21%.

h) Finally, we need to do something at the end of the project. Let's capitalize the value byassuming that the project continues in perpetuity with 1% growth. Use the Year 5 cash flow to find this value and treat it as a cash flow in Year 5.

Given this information, does it make sense to do this project? Find NPV, IRR, and the payback period and use these to support your conclusion.

Please do calculations in excel. Please show formulas.