Case 2, Team 6.docx - Case 2 Team 6 Mark Anderson Jake McDonough Cody Rossman Chase Wietfeld 1 Which of the following be included in Sneaker 2013s

Case 2, Team 6.docx - Case 2 Team 6 Mark Anderson Jake...

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Case 2, Team 6: Mark Anderson, Jake McDonough, Cody Rossman, Chase Wietfeld 1)Which of the following be included in Sneaker 2013’s capital budgeting cash flow projection? Why or why not? A. Building a factory and purchase/installation of the equipment: Yes, because this expense is directly related to the development of the shoe.B. Research and development costs: No, because this is a sunk cost. C. Cannibalization of other sneaker sales: Yes because sales will go down in older shoes and the variable cost will begin to lower when we slow down production of this shoe.D. Interest costs: No because it is a consequence of capital structure and included in the WACC.E. Changes in current asset/current liabilities accounts: Yes, because this change will directly affect the cash flows.F. Taxes: Yes because we can’t avoid paying them, so this is another sunk cost.G. Cost of goods sold: Yes because this is directly related to the shoe.H. Advertising and promotion expenses: Yes, because this is a direct expense of the product.I. Depreciation charges: Not included to show less income, but added back after taxes are takenout.
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