Anderson Inc., is a startup company that designs, manufactures, and distributes environment friendly iPhone covers. Pat, the CEO of Anderson, was selected to present at the Dragons Den TV show. Pat pitched the company at the show. She offered 10% equity stake in the company in return for $100,000 in investment.

Investors were impressed by the presentation and three of them made offers. Jim was willing to give $100,000 in return for 40% equity stake. Kevin offered to give $100,000 for 10% royalty on all sales and was willing to have no equity in return. Arlene offered to give $100,000 for 2% royalty on all sales and 10% equity stake.

Pat called you during the show and consulted you to figure out which one of the dragons offer was the most economical for the company. Since you had helped Pat with preparing financials for Anderson, you have access to the latest income statement of Anderson as shown below:

	Anderson Inc., Income Statement
Revenue
Sales			500000
Expenses-Variable
COGS			274000
Gross profit			226000
S G &A
	Salaries		60000
	Advertising		48000
	Insurance Premiums		12000
	Utilities		2400
	Maintenance		2000
	Accounting Services		2000
	Office Supplies		1000
	Miscellaneous		6000
		Total	133400
EBITDA			92600
Depreciation			31400
EBIT			61200
Interest			0
EBIT			61200
Taxes			21420
EAT or NI			39780

Using the above information answer the following:

A) Calculate the expected payout to Jim, Kevin and Arlene given their offers. Hint: You can calculate payout to each for $100 sales.

B) Among the three scenarios whose offer would you recommend Pat should accept and why?