a) Analysis of the proposed delivery service. This analysis should be conducted from a qualitative and quantitative aspect. You should identify two pros and two cons of the proposal. Then you should provide a summary of the results of your analysis (see "Quantitative analysis guidelines" below). You will need to determine if Plentitude should move forward with the service. Quantitative analysis guidelines. You will complete the calculations in Excel, and discuss the results in the report. For each of the alternatives that require a quantitative analysis, in the report you should: i) Briefly summarize the alternative ii) Provide a review of the results of your analysis. Please do not explain how you completed the analysis (i.e. do not tell me you multiplied X by Y, and then subtracted 5 , and divided by 7). A review of the analysis means that you should describe the overall approach that you used and why it is appropriate (for example, you are going to perform an NPV analysis - briefly explain what it is and why it is an appropriate tool to use). Then explain the results of your analysis (for example, based on my analysis, the NPV of the purchase of the equipment is $X, meaning that overall, the alternative is profitable/unprofitable). Plenitude Inc. (Plenitude) is a national food-processing company that specializes in the creation of healthy and easy-to-prepare frozen meal kits that are sold in major grocery stores across the country. Plenitude has production locations in six provinces, and works with local farmers and meat-processing plants to source the ingredients for its meal kits. The ingredients are then flash-frozen and packaged at one of the company's locations, and then shipped to the grocery stores. Plenitude's success has been attributed to its early recognition of the emerging trend toward healthy eating. Kenny Parton grew up on a farm in southern Ontario and spent years working at a local grocery store during his teenage years and early 20 s. In 2013, he partnered with a friend, Jenny Morrison, a licensed nutritionist, and started preparing their first meal kits in Jenny's kitchen. Kenny is the controlling shareholder. Plenitude prides itself on hiring knowledgeable staff who have a love of good, healthy, nutritious food that tastes amazing. The company's reputation for superior taste, quality, and variety has resulted in its brand being well recognized in the grocery stores. The fact that Plenitude partners with local farmers and meat-processing plants is a key differentiator in the market, as it ensures that at least 70% of all products are locally sourced. In addition, some of Plenitude's key suppliers are focusing more on environmentally safe and organic farming techniques, which Plenitude hopes to capitalize on in its branding. Kenny estimates that about 20% of all ingredients are certified organic, and he'd like to see that increase to 30% in the next three years. In response to the growing demand for fresh ready-to-make meal kits, in 2020 , Plenitude invested in an expansion of its main processing centre in Ontario. Kenny felt the expansion was necessary to maintain market share in the highly competitive food industry. Plenitude introduced a new product in 2020, called "We-Make, U-Bake". This product is Plenitude's response to competing with the popular home-delivered freshingredient meal kits. Instead of frozen meal kits, the product is a fresh-ingredient meal kit, and instead of being delivered, the kits are available in major grocery stores in the Toronto area. Kenny believes this program has been very successful, as the company saw a significant increase in its revenues. Even though Plenitude's prices are about 5\% higher than other fresh-ingredient meal kits, its customers are willing to pay a premium for locally produced, organic foods. Plenitude tries to keep its prices for most products stable throughout the year. Based on industry information, the organic food market grew by 5% in 2022 , and is expected to grow by 7% in 2023 and 2024 . New Delivery Service Plenitude wants to enter into the home delivery business for its "We-Make, U-Bake" product, using its own vehicles and staff. Kenny had his controller provide an estimate of the delivery service's costs and revenues. Kenny would like a quantitative and qualitative analysis of this option, and a recommendation of whether Plenitude should proceed. This project has a five-year life, and Kenny wants it to generate an 8% rate of return. Plenitude's tax rate is 26%. Quantitative information Upfront costs: - Delivery vehicles with temperature-controlled storage: $800,000 - Additional upfront costs: $400,000 - Working capital investment: $100,000 At the end of the project, the vehicles can be sold for $50,000. Plenitude uses straightline depreciation for its vehicles. Additional quantitative information: - Average food selling price per delivery: $35 - Average delivery fee charged to customer: 20% of the food selling price - Average deliveries per year: 52,000 in the first year, increasing by 4,000 per year in each subsequent year. - Cost of food: 50% of the food's selling price - Annual labour costs: $450,000 - Annual website maintenance costs: $80,000 - Annual vehicle operating and maintenance costs: $100,000 - Marketing costs: $150,000 in the first year, and $70,000 in each subsequent year Qualitative information - The home-delivered fresh-ingredient meal delivery market is highly competitive, with signature brands such as Hello Fresh, Chef's Plate, and Goodfood dominating this sector. However, Plenitude plans to leverage its own brand recognition from local grocery stores to build rapid market share. - Plenitude plans to target two major age demographics, those aged 35-60 years old, and seniors (age 60+ ), as they are more likely to cook their meals at home 5 than other age demographics. However, seniors, on average, spend only about 5% of their food budget on ready-to-make foods, whereas the 3560 year old population spends up to 10% of their food budget on ready-to-make meals