Sneaker 2013 Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Sneaker 2013 Case Study Analysis

It could be seen in the above table, that the calculated NPV for the project would be $57,676,109 along with the IRR of 19%, payback period of 3.73 years, discounted payback of 4.64 years and the profitability index of 34%. Thus, it represented that the project is viable and profitable,because it is yielding a positive increased NPV along with a profitability index of 34%, which is much higherthan expected. Furthermore, the project’s expected discounted rate is 11%, while the IRR is 19%, which is also much higher than expected. In addition to all this, the projects will start to yield profits and recover the cost spent in just 3.73 years. With respect to discounted cash flows, the recovering period would be 4.64 years, which also representing the project’s viability and profitability.

Persistence’s- NPV, IRR, Discounted Payback, Payback Period andPI

A DCF analysis has been performed in order to examine the Persistence product viability by calculating the net present value of the project along with IRR, Payback period, Discounted payback period and the PI. In the below table, the NPV, IRR, PI, Payback period and discounted payback period regarding Sneaker have been calculated.

It could be seen in the above table that the calculated NPV for the project would be negative, representing the amount of $10,401,289with an inclusion of 6%, IRRno payback period, no discounted payback period and the PI of negative 18%. Thus, it represented that the project is not viable and profitable, because it is yielding a negative NPV along with a negative profitability index of 18%, which represented that the project will incur losses in future. Furthermore, the project’s expected discounted rate is 14%, while the IRR is 6%, which is also much lower than expected. In addition to all this, the projects will not be able to recover the cost spent and will not yield profits in future.Thus, the project is not profitable(Nwogugu, 2016).

Feasible Optionfor New Balance Shareholders

According to financial projections, it could be seen that the Sneaker project is more feasible and viable as compared to other project. The NPV and IRR of Sneaker is larger than the NPV and IRR of Persistence project. In addition to this, the Persistence project would not providing a positive NPV. The net present value (NPV) of Persistence Project is lower than Persistence Project which does not makes the project feasible and implies the unfeasibility of the project or projected investment. Thus, it is not a better option for the shareholders.

The Persistence Project is riskier, because the market is new, unfamiliar and immature. Also, the company has enough experience and expertise in the field of young athletes’ market of Sneaker shoe. Another issue is that the company would need to purchase the manufacturing equipment and design technology in the hiking shoe from an outside source, which would accounted for the investment of $50 million, this need to be considered the risky investment for the company. In addition to all this, the Persistence project is unable to recover its cost within thelifeline of the project, while, in the Sneaker project the companycouldachieve the high profits and could recover within 4 years. Thus, with due respect of quantitative as well as qualitative analysis, Sneaker 2013 is the more viable and profitable project.

Recommendations

Thus, after analyzing all the information with the sated facts and figure, it is recommended that the company should start Sneaker 2013 shoe project, because it is yielding an increased profitand positive NPV. It represented that Sneaker 2013 project is viable and profitable, because it is yielding a positive increased NPV along with a profitability index of 34%, which is much higher than expected and also more greater as compared to other project.Thus, the Sneakers 2013 project is viable and profitable from both qualitative and quantitative standpoints. Investing in Sneakers 2013 project would allow the company to maximize the wealth of the investors.

Conclusion

In order to market the new product- Sneaker 2013, Michelle Rodriguez has to analyze the product’s viability and future financials with the help of market analysis and available information. New Balance located at Brighton and well known for its high quality and wide variety of shoes, in the United States. It is concluded that the Sneaker 2013 is more feasible and viable than the Persistence project. Thus, it is recommended that that the company should start Sneaker 2013 shoe project, because it is yielding an increased profit and positive NPV.................................

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