You have been hired by Nike Inc (NKE) to assess the viability of a new line...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You have been hired by Nike Inc (NKE) to assess the viability of a new line athleisure wear. The expected sales and costs for this project are listed below. The initial investment for production equipment is straight-line depreciated over 7 years. There is a requirement for net working capital to get the project started which is recovered at the end of the project's life. There is also an expected salvage value for the equipment. Calculate the projected cash flows. Then determine if Nike Inc. will accept or reject this project. Assume the project has a life of only 4 years. Unit sales Price (per unit) Variable Cost (per unit) SG&A Costs (per year) Initial Investment (Equipment) Useful Life (Equipment) Salvage Value (YR4) Initial NWC (YR1) Tax rate Required return Year Sales Cost of Goods Sold Gross Profit SG&A Costs Depreciation. EBIT $ $ $ Taxes (28%) Unlevered Net Income $ Year 1 2,000,000 75.00 48.20 10,000,000 129,000,000 5.00 30,000,000 35,000,000 Question 1- Complete the pro forma income statement for the life of the project and calculate the Unlevered Net Income for each year. 28.0% 25.9% Year 1 Year 2 2,750,000 Year 3 2,950,000 Year 2 Year 4 3,400,000 Year 3 Year 4 You have been hired by Nike Inc (NKE) to assess the viability of a new line athleisure wear. The expected sales and costs for this project are listed below. The initial investment for production equipment is straight-line depreciated over 7 years. There is a requirement for net working capital to get the project started which is recovered at the end of the project's life. There is also an expected salvage value for the equipment. Calculate the projected cash flows. Then determine if Nike Inc. will accept or reject this project. Assume the project has a life of only 4 years. Unit sales Price (per unit) Variable Cost (per unit) SG&A Costs (per year) Initial Investment (Equipment) Useful Life (Equipment) Salvage Value (YR4) Initial NWC (YR1) Tax rate Required return Year Sales Cost of Goods Sold Gross Profit SG&A Costs Depreciation. EBIT $ $ $ Taxes (28%) Unlevered Net Income $ Year 1 2,000,000 75.00 48.20 10,000,000 129,000,000 5.00 30,000,000 35,000,000 Question 1- Complete the pro forma income statement for the life of the project and calculate the Unlevered Net Income for each year. 28.0% 25.9% Year 1 Year 2 2,750,000 Year 3 2,950,000 Year 2 Year 4 3,400,000 Year 3 Year 4
Expert Answer:
Answer rating: 100% (QA)
To calculate the Unlevered Net Income we need to follow these steps i Calculate the Sales for each y... View the full answer
Related Book For
Accounting Volume 2
ISBN: 978-0176509743
2nd Canadian edition
Authors: James Reeve, Jonathan Duchac, Sheila Elworthy, Carl S. Warren
Posted Date:
Students also viewed these finance questions
-
On January 1, when the market rate of interest was 5% for similar bonds, a company issued a $15,000,000, 5%, 10-year bond that pays semiannual interest on June 30 and December 31, receiving cash of...
-
The current market rate of interest is 8 percent. At that rate of interest, businesses borrow $500 billion per year for investment and consumers borrow $100 billion per year to finance purchases. The...
-
The market rate of interest for a bond issue which sells for more than its face value is Less than the interest rate stated on the bond. Independent of the interest rate stated on the bonds. Higher...
-
(CMA, adapted) Roletter Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Bob Anderson, the controller, is responsible for preparing Roletters...
-
Why might it be more convenient to set up network models in Excel by using a tabular form?
-
A spreadsheet is used to randomly generate a number from 1 to 4000. Event B is generating a number less than 500. Determine the number of outcomes in the event. Then decide whether the event is a...
-
Renewable Co. uses leasing as a secondary means of selling its products. The company contracted with Green Corporation to lease a machine with an economic life of 12 years to be used by Green...
-
Davids Sport Supplies is a store that sells sports equipment and gear for teenagers and young adults. Davids is in the process of assigning the location of storage areas in its warehouse to minimize...
-
Interest rates are influenced by various factors reflecting demand for funds and the supply of funds available in the credit markets. Identify the key factors that changed the demand for and supply...
-
A division of your company purchased a large quantity of new desktop computers during the current fiscal year. An internal audit manager has asked you to audit the process used to acquire the...
-
Evaluate the cost and benefits of the accountingstandard-setting process (versus an unregulated environment) 2 answers
-
se the information provided below to prepare the Statement of Comprehensive Income of Cheshire Ltd for the year ended 3 1 December 2 0 2 3 . INFORMATION The information given below was extracted from...
-
The following transactions occurred during August: (a) Invested cash in the business, $30,000. (b) Purchased a used van for cash, $8,000. (c) Purchased plumbing equipment on account, $4,000. (d)...
-
In your new role as Chief Human Resources Officer (CHRO) for a major retail organization, you have been tasked within the first 30 days by the CEO to conduct a presentation to the management team on...
-
You are a Project Manager for a boutique design and build contractor in Singapore. The company specialises in designing and building landed residential houses, and renovating condominium apartments,...
-
Provide a constructive comparison between the scientific management Human Relations human resource approach as well as the strategic human resource management approach?
-
The following information is available for a custom manufacturer, Inventories Costs incurred for the period Raw materials, beginning $ 38,300 Raw materials purchases $ 18, 760 Work in process,...
-
The Smiths buy a house. They borrow 80 percent of the purchase price from the local ABC Savings and Loan. Before they make their first payment, ABC transfers the right to receive mortgage payments to...
-
Emily Gordon and Grace Cheung joined together to form a partnership. Is it possible for them to lose an amount greater than the amount of their investment in the partnership? Explain.
-
Comp You Solutions Corp. is a national information technology consulting firm. The following selected accounts appear in the ledger of Comp You Solutions Corp. on April 1, 2015, the beginning of the...
-
For 2015, Eurie Company reported its most significant decline in net income in years. At the end of the year, H. Finn, the president, is presented with the following condensed comparative income...
-
Derive the expressions for submatrices \(\boldsymbol{B}_{j}, \boldsymbol{D}_{j}, \boldsymbol{A}_{j}\) in the blocktridiagonal form (8.38) of the matrix equation for the five-point discretization...
-
Consider the two-dimensional Poisson equation (8.6) in a rectangular domain \(0 \leq x \leq L_{x}, 0 \leq y \leq L_{y}\). The boundary conditions are \[\frac{\partial u}{\partial x}(0, y)=g_{1}(y),...
-
Develop a finite difference scheme for the PDE in problem
Study smarter with the SolutionInn App