Egara Football Club: Looking For A Front Player From A Financial Prism Case Solution
Ans no. 6
In the current situation and comparison with highest NPV generating player who is Xavier Merchans having NPV around 700,000 Euros. The price of Cristino Rimado’s signing should be lowered to around 9.25 million Euros. At the price Cristino Rimado’s NPV matches with Xavior Merchans.
Ans no.7
In the current situation and comparison with highest IRR generating player who is Albert Roviroso having IRR 51%. The price of Cristino Rimado’s signing should be lowered to around 7.2 million Euros. At the price Cristino Rimado’s IRR matches with Albert Roviroso.
Ans no. 8
In the current situation and comparison with highest IRR generating player who is Albert Roviroso having IRR 51%. The salary of Xavior Merchans’s should be lowered to around 0.69 million Euros. At the price Xavior Merchans’s IRR matches with Albert Roviroso.
Ans no. 9
To make Cristino Rimado’s signing feasible, around 1.5 million Euros should be paid within three years. At this amount NPV and IRR becomes greater. Additional payback period also becomes lower which improves the overall feasibility of Cristino Rimado.
Ans no. 10
At an assumed discount rate of 24%, Xavior Merchans and Albert Roviroso are good options. I would recommend opting for Xavior Merchans because his NPV and payback are better than Albert. Also, IRR is greater than the company’s required rate of return.
Appendix
| Cristino Rimado | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Signing | -10,000,000 | - | - | - | - | - |
| Representative Fees | -1500000 | - | - | - | - | - |
| Collection of shirts | - | 10800000 | 4392000 | 3720000 | 3780000 | 3840000 |
| Collection of Stadium | - | 250000 | 200000 | 150000 | 150000 | 150000 |
| Wages | - | -2000000 | -2000000 | -2000000 | -2000000 | -2000000 |
| Total | -11,500,000 | 9050000 | 2592000 | 1870000 | 1930000 | 1990000 |
| Xavier Marchans | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Signing | -2750000 | - | - | - | - | - |
| Representative Fees | -412500 | - | - | - | - | - |
| Collection of shirts | - | 2520000 | 2379000 | 2232000 | 2268000 | 2304000 |
| Collection of Stadium | - | 100000 | 100000 | 100000 | 100000 | 100000 |
| Wages | - | -1000000 | -1000000 | -1000000 | -1000000 | -1000000 |
| Total | -3162500 | 1620000 | 1479000 | 1332000 | 1368000 | 1404000 |
| Dudu Regba | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Signing | -1600000 | - | - | - | - | - |
| Representative Fees | -240000 | - | - | - | - | - |
| Collection of shirts | - | 1512000 | 1281000 | 1041600 | - | - |
| Collection of Stadium | - | 100000 | - | - | - | - |
| Wages | - | -625000 | -625000 | -625000 | - | - |
| Total | -1840000 | 987000 | 656000 | 416600 | 0 | 0 |
| Albert Rovirosa | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
| Signing | -500000 | - | - | - | - | - |
| Representative Fees | -75000 | - | - | - | - | - |
| Collection of shirts | - | 180000 | 366000 | 558000 | 744000 | 1488000 |
| Collection of Stadium | - | 50000 | 25000 | 150000 | 150000 | 150000 |
| Wages | - | -100000 | -200000 | -300000 | -300000 | -300000 |
| Total | -575000 | 130000 | 191000 | 408000 | 594000 | 1338000 |
| Assuming Discount rate 24% | ||||
| Cristino Rimado | Xavier Marchans | Dudu Regba | Albert Rovirosa | |
| NPV | - 32,205.05 € | 695,161.65 € | - 321,687.05 € | 464,272.22 € |
| IRR | 24% | 37% | 7% | 51% |
| Payback | 1.94 yrs | 2.04yrs | 2.30 yrs | 3.32 yrs |
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