CASE: $$Sneakers $2013$

WARNING! The Persistence section of the case will not be used. You only need to provide a solution for the Sneakers $2013.$

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$1.$ Should the following be included in Sneaker $2013$s capital budgeting cash flow projection?

For each entry, answer $$Yes$$ or $$No$$ in the space next to it$.$

Building a factory and purchase$/$installation of the equipment

Yes

Research and development costs

$$

Cannibalization of other sneaker sales

Yes

Interest costs

$$

Taxes

Yes

Cost of goods sold

$$

Advertising and promotion expenses

$$

Depreciation charges

No

$$

$2.$ For Sneakers $2013,$ what is the project$$s initial $($year $2012)$ investment outlay?

$$

$$

$3.$ For Sneakers $2013,$ what are the project$$s annual cash flows?

Year

$2013$

$2014$

$2015$

$2016$

$2017$

$2018$

Cash Flow

$$

$$

$$

$$

$$

$$

$$

$$

$4.$ Does Sneaker $2013$ appear viable from a quantitative standpoint? To answer this question, estimate the project$$s payback, net present value, and internal rate of return.

Payback

$$

NPV

$$

IRR

$$

$$

$$

$5.$ What is your final recommendation to Rodriguez? Should she accept the project or not?