. 1. A website for Lawn Care: As the fourth year of operations came to a conclusion, Lawn Care considered building a website to attract more customers. The website was estimated to cost $5,000 per year to build, maintain and host. No additional costs were expected Questions: 1. What is the minimum number of new customers Lawn Care should expect to gain from the website in order to make it a profitable expenditure? Assume that the price and cost information for year 5 will be the same as year 4, which are in the HW2 solution (attached). Additional mowers (laborers) are available at the same wages. The existing moying equipment is sufficient to support 100% more customers without additional investment. In thinking about "new customers," assume new customers will come in the same "mix" as existing customers: 50% small, 33% medium and 17% large There is no such thing as "half a customer." As a general rule, if your answer is a non-integral number of customers, round up to the next whole customer. Show your calculation of (i) the contribution per customer (price/average revenue, variable cost and contribution), (ii) the fixed costs, and (iii) the breakeven number of customers. . . 2. If only "small" customers were expected, what is minimum number of small customers that would be necessary to make it a profitable expenditure. Again, show your calculations. 3. 15 new small customers are added in year 5, what will be the year 5 income statement? (Assume that the only change from year 4 is the new website and the additional customers that are serviced at the price and variable costs in year 4). If all of the new customers can be attributed to the website, was it a good investment? In a sentence, why? January 1 Year 2- December 31, Year Year 2 January 1. Year December 31, Yeart Year Lawn Care Income Sulement ind it Year December 31, Year! Year 1 Text 2 5 40120 1.400 $ January 1 Year 3 December 31, Year Year 3 Increase price New price 5.00% $ 15,120 5 15.120 $ 10.00 38400 Revenge 5 15w 52/ 10 sets/ Sant Salut 5 $ 5 14.400 14.400 2.600 5 15.120 $ 15,120 $ 10.000 Cost of Good old 23,000 3 5 21.042 23.010 20.000 5 10.200 bare 10/1.820 hrs Ga/1.900 $ $ 19.200 3. $ 1.200 5 1,810 5 15. O 5 15.360 3 17.30 5 17,280 Gross Profit General and Administrative agenes 4.300 5 300 $ 100 $ 4300 Marengo Administration 520 * 150 hrs Septes and Me 5 5 1.000 1000 1,000 5 $ $ $ $ $ 1.000 LOOO 100 100 HTDA (earning before interest, and depreciation 5 11.050 5 11.OGO $ 12.90 5 12.30 interest 5 5 5 50 1.25 5 175 5 175 5 Total Annual Depreciation: Mowenses/ Shed $1.500/20 100 75 5 $ 200 75 75 Earnings Before Taxes 105 $ 10 R$ $ 12 805 5 12655 5 $ Taxes 25.00% 5 2.721 5 1,101 15 1154 Net Income After Tax 5 8.154 5 154 $ 960 $ 2491 Garrheart of the business and the fint year of operation As Dec As December Year A Dece, Yes December Year Act Cat| $ 5.189 SA Rece . 50.00 50.00 $0.00 3 5 $09 L16 300 O S. 5 628 $.09 1.09 5 100 5 5 CA 10.00 $ R419 $ 20,51 $ 10.30 $ 40 $ w Gra w Mwen Grook Valueshed Garantie De Mand Shed Net Bank of its $0.00 $0.00 50.00 $ $ 000 500 1,500 175 125 $ $ 500 1,500 100 1 156 LESO 5 5 5 1500 $ so. $ 5 $ LAS $ 1.700 $0.00 $ 10.154 $ 22,241 $ 11. $ 41,336 and Owen outy Asbe Sale $0.00 $0.00 $0.00 MT 5.00 1,114 3,014 Our bis 50.00 $ 5 2.814 5 1814 $ 1.14 Long Term Debt $0.00 5 3 $ 5 100 0005 3 5 3814 $ 1,814 3 43314 Com Sock Preferred Rock tartanai $ 2.100 S 2,100 $0.00 $0.00 50.00 2,100 5 2.100 $ $ 164 16320 $ 25.3 5 Totul Owner's touty 50.00 $10.24 $ 10.40 $ 21.011 5 Turtles and Owners wity 17.521 50.00 5 10,144 TRUE 5 $ 22.141 TRUE 31,845 TRUE THUE Statement of Changes in Cash Flow Year 1 Year 2 Year 3 Year 4 8,164 175 (3,156) $ 5 9,604 175 (316) $ $ 8,164 175 (3,156) (100) 9,491 275 Net Income Depreciation (Inc)/Dec in Accts Receivable (incl/Dec in Inventory Inc/(Dec) in Accts Payable Inc/(Dec) in Salaries Payable $ $ $ $ $ $ 5 $ $ $ $ $ 0 0 3,814 Total Cash Flow from Operations $ 5,083 $ 8,996 $ 9,463 $ 9,766 $ (2.000) $ $ 5 (inc) in Gross long-term Investments Sale of Gross Long-term Investments (Incl/Dec in Short-term Investments (500) $ $ $ $ Total Cash Flow from Investments $ 12,000) $ (500) Inc/(Dec) Short-term Financing Inc/(Dec) Long-term Financing Inc/(Dec) Equity Investment (Dividends and Distributions paid to owners) $ $ $ $ 5 500 2,100 $ S 2,100 $ $ $ 500 Total Cash Flow from Financing Total Annual Cash Flow Cash Balance at Beginning of Year Cash Balance at End of Year Check $ 5,183 $ $ 5,183 TRUE $ $ $ 8,996 5,183 14,179 TRUE $ $ $ 9,463 14,179 23,642 TRUE $ $ $ 9,766 23,642 33,408 TRUE . 1. A website for Lawn Care: As the fourth year of operations came to a conclusion, Lawn Care considered building a website to attract more customers. The website was estimated to cost $5,000 per year to build, maintain and host. No additional costs were expected Questions: 1. What is the minimum number of new customers Lawn Care should expect to gain from the website in order to make it a profitable expenditure? Assume that the price and cost information for year 5 will be the same as year 4, which are in the HW2 solution (attached). Additional mowers (laborers) are available at the same wages. The existing moying equipment is sufficient to support 100% more customers without additional investment. In thinking about "new customers," assume new customers will come in the same "mix" as existing customers: 50% small, 33% medium and 17% large There is no such thing as "half a customer." As a general rule, if your answer is a non-integral number of customers, round up to the next whole customer. Show your calculation of (i) the contribution per customer (price/average revenue, variable cost and contribution), (ii) the fixed costs, and (iii) the breakeven number of customers. . . 2. If only "small" customers were expected, what is minimum number of small customers that would be necessary to make it a profitable expenditure. Again, show your calculations. 3. 15 new small customers are added in year 5, what will be the year 5 income statement? (Assume that the only change from year 4 is the new website and the additional customers that are serviced at the price and variable costs in year 4). If all of the new customers can be attributed to the website, was it a good investment? In a sentence, why? January 1 Year 2- December 31, Year Year 2 January 1. Year December 31, Yeart Year Lawn Care Income Sulement ind it Year December 31, Year! Year 1 Text 2 5 40120 1.400 $ January 1 Year 3 December 31, Year Year 3 Increase price New price 5.00% $ 15,120 5 15.120 $ 10.00 38400 Revenge 5 15w 52/ 10 sets/ Sant Salut 5 $ 5 14.400 14.400 2.600 5 15.120 $ 15,120 $ 10.000 Cost of Good old 23,000 3 5 21.042 23.010 20.000 5 10.200 bare 10/1.820 hrs Ga/1.900 $ $ 19.200 3. $ 1.200 5 1,810 5 15. O 5 15.360 3 17.30 5 17,280 Gross Profit General and Administrative agenes 4.300 5 300 $ 100 $ 4300 Marengo Administration 520 * 150 hrs Septes and Me 5 5 1.000 1000 1,000 5 $ $ $ $ $ 1.000 LOOO 100 100 HTDA (earning before interest, and depreciation 5 11.050 5 11.OGO $ 12.90 5 12.30 interest 5 5 5 50 1.25 5 175 5 175 5 Total Annual Depreciation: Mowenses/ Shed $1.500/20 100 75 5 $ 200 75 75 Earnings Before Taxes 105 $ 10 R$ $ 12 805 5 12655 5 $ Taxes 25.00% 5 2.721 5 1,101 15 1154 Net Income After Tax 5 8.154 5 154 $ 960 $ 2491 Garrheart of the business and the fint year of operation As Dec As December Year A Dece, Yes December Year Act Cat| $ 5.189 SA Rece . 50.00 50.00 $0.00 3 5 $09 L16 300 O S. 5 628 $.09 1.09 5 100 5 5 CA 10.00 $ R419 $ 20,51 $ 10.30 $ 40 $ w Gra w Mwen Grook Valueshed Garantie De Mand Shed Net Bank of its $0.00 $0.00 50.00 $ $ 000 500 1,500 175 125 $ $ 500 1,500 100 1 156 LESO 5 5 5 1500 $ so. $ 5 $ LAS $ 1.700 $0.00 $ 10.154 $ 22,241 $ 11. $ 41,336 and Owen outy Asbe Sale $0.00 $0.00 $0.00 MT 5.00 1,114 3,014 Our bis 50.00 $ 5 2.814 5 1814 $ 1.14 Long Term Debt $0.00 5 3 $ 5 100 0005 3 5 3814 $ 1,814 3 43314 Com Sock Preferred Rock tartanai $ 2.100 S 2,100 $0.00 $0.00 50.00 2,100 5 2.100 $ $ 164 16320 $ 25.3 5 Totul Owner's touty 50.00 $10.24 $ 10.40 $ 21.011 5 Turtles and Owners wity 17.521 50.00 5 10,144 TRUE 5 $ 22.141 TRUE 31,845 TRUE THUE Statement of Changes in Cash Flow Year 1 Year 2 Year 3 Year 4 8,164 175 (3,156) $ 5 9,604 175 (316) $ $ 8,164 175 (3,156) (100) 9,491 275 Net Income Depreciation (Inc)/Dec in Accts Receivable (incl/Dec in Inventory Inc/(Dec) in Accts Payable Inc/(Dec) in Salaries Payable $ $ $ $ $ $ 5 $ $ $ $ $ 0 0 3,814 Total Cash Flow from Operations $ 5,083 $ 8,996 $ 9,463 $ 9,766 $ (2.000) $ $ 5 (inc) in Gross long-term Investments Sale of Gross Long-term Investments (Incl/Dec in Short-term Investments (500) $ $ $ $ Total Cash Flow from Investments $ 12,000) $ (500) Inc/(Dec) Short-term Financing Inc/(Dec) Long-term Financing Inc/(Dec) Equity Investment (Dividends and Distributions paid to owners) $ $ $ $ 5 500 2,100 $ S 2,100 $ $ $ 500 Total Cash Flow from Financing Total Annual Cash Flow Cash Balance at Beginning of Year Cash Balance at End of Year Check $ 5,183 $ $ 5,183 TRUE $ $ $ 8,996 5,183 14,179 TRUE $ $ $ 9,463 14,179 23,642 TRUE $ $ $ 9,766 23,642 33,408 TRUE