APPENDIX B: Expansion - Financial Details The controller has put together some projections associated with the expansion into Israel. The breakdown of the expected start-up costs for this project include:

Equipment: The company plans to rent their manufacturing space, but would need to incur $1,000,000 for the purchase of new equipment.

Marketing and Advertising Expenses: InnovAppliance plans to allocate $500,000 for marketing and advertising campaigns targeted at the Israeli market. This includes promotional activities, market research, and advertising campaigns to create brand awareness and attract customers.

Research and Development Costs: Over the last 2 years the company has spent $185,000 on travel and research & development related costs. To adapt the products for the Israeli market and meet local regulatory requirements, InnovAppliance anticipates incurring another $300,000 in research and development costs. This includes product modifications, certifications, and testing.

Distribution and Logistics Expenses: Establishing distribution channels and ensuring efficient logistics in a new market involve additional costs. InnovAppliance estimates that it will need to allocate $200,000 for distribution network setup, transportation, warehousing, and order fulfillment in Israel.

Legal and Regulatory Fees: Expanding into a new country requires legal and regulatory compliance. InnovAppliance expects to spend $100,000 on legal and regulatory fees for market entry, permits, licensing, and compliance with Israeli regulations.

Administrative Costs: Additional administrative costs are anticipated for managing operations in Israel. These costs include setting up a local office, hiring local staff, and complying with local administrative requirements. InnovAppliance estimates that it will need to allocate $150,000 for administrative expenses associated with the expansion.

Financing costs: Depending on the financing option the company decides to pursue, there could be additional interest expense that the company will need to incur. The revenue projections for the expansion into Israel in the first 5 years are as follows:

Year 1: InnovAppliance expects to generate $3,000,000 in revenues from the Israeli market.

Year 2: The company anticipates a growth rate of 20% in the Israeli market.

Year 3: The company projects further growth of 15% in the Israeli market

Year 4 & 5: The company expects 10% growth per year.

Going forward if the company uses the new cheaper Israeli suppliers, they expect the gross profit % to increase by 8% in comparison to the 2022 operations in Canada. Annual labor costs are 10% higher in Israel, however the remaining operating expenses are expected to fall in line with the same % of sales as Canadian operations. The Israeli tax rate is expected to be 50% of the Canadian tax rate.

calculate income statement for the above.