18 Question 2 Note: There is a PDF file attached to this question. Click it to view it. You will also need the Present Value Tables that you were asked to bring for this exam. The Barcelona Football Club (BFC) is a team with a long tradition of winning. However, their performance in the last three years has been traumatic. The team has not won any major championship and attendance at games has dropped considerably, Rakuten is BFC's major corporate sponsor. Mikitan, the president of Rakuten, is also the president of the Barcelona Football Club Mikitani proposes that the team purchase the services of British star, Gareth Bale. Bale would create excitement for BFC's fans and sponsors, Bale's agent notifies BFC that terms for the superstar's signing with BFC are a payment of 3 million payable now (start of 2021) plus the following four-year contract (assume all amounts are in milions and are paid at the end of each year) 2021 2022 2023 2024 Salary 4.5 ES 6 16.5 Living and 1 1.2 1.3 1.4 other costs Mikitani's initial reaction is one of horror. As president of Rakuten, he has never earned more than 800,000 a year. However, he swallows his pride and decides to examine the expected additions to BFC's cash inflows if Bale is signed for the four year contract (assume all cash inflows are in milions and are received at the end of each year) 2021 2022 2024 12 2023 3 3 3 3.5 4 4 Cash receipts Corporate Sponsorship Television royalties Merchandise income (net of costs) 1.2 21.4 E2 10.6 20.8 ED.7 10.7 Mikitani bolleves that a 12% required rate of return is appropriate for investments by BFC Required (show your workings for calculations & write in your own words): (a) For Balo's proposed four year contract, calculate 0) Payback period (2 points) (1) Not Present Value (3 points) (b) Based on your calcuation in port(a) is Balo a good purchase for FC? Why? (2 points) (c) Suggest three (3) non-financial factors Mikitani should consider who dociding whether to sign Balo the four year contract (3 points) Note: There is a PDF file attached to this question. Click It to vlew it. You will also need the Present Value Tables that you were asked to bring for this exam. The Barcelona Football Club (BFC) is a team with a long tradition of winning. However, their performance in the last three years has been traumatic. The team has not won any major championship and attendance at games has dropped considerably. Rakuten is BFC's major corporate sponsor. Mikitan, the president of Rakuten, is also the president of the Barcelona Football Club. Mikitani proposes that the team purchase the services of British star, Gareth Bale. Bale would create excitement for BFC's fans and sponsors. Bale's agent notifies BFC that terms for the superstar's signing with BFC are a payment of 3 milion payable now (start of 2021) plus the following four-year contract (assume all amounts are in milions and are paid at the end of each year); 2021 2022 2023 2024 Salary 4.5 5 6 16.5 Living and 1 1.2 1.3 1.4 other costs Mikitani's initial reaction is one of horror. As president of Rakuten, he has never earned more than 800,000 a year. However, he swallows his pride and decides to examine the expected additions to BFC's cash inflows i Bale is signed for the four-year contract (assume all cash inflows are in milions and are received at the end of each year) 2021 2 2023 2022 3 2024 3 3 3 3.5 4 54 Cash receipts Corporate sponsorship Television royalties Merchandise income (net of costs) 12 1.4 E2 0.6 0.6 0.7 0.7 Mikitani bolloves that a 12% required rate of return is appropriate for investments by BFC. Required (show your workings for calculations & write in your own words): (a) For Balo's proposed four-year contract, calculato Payback period (2 points) (11) Net Present Value (3 points) (b) Based on your calculation in part(), is Balo a good purchase for BFC? Why? (2 points) (c) Suggest three (3) non-financial factors Mikitani should consider whon deciding whether to sign Balo the four- year contract. (3 points)