Assume you are the CEO of the organization established in your simulation team (i.e. Andrews, Baldwin, etc.).

Your responsibility now is to construct the Annual Letter to Shareholders for this organization. For the annual report, include information regarding the changes from round 6 into round 7 that provides stockholders with the most up to date results and identifies projected decisions and desired outcomes expected by implementing your decisions.

Professionalism is critical when preparing the letter. Be sure that you utilize the key concepts from the text that apply to all areas of this letter.

Your letter must include the following:

Section 1 - Review the past

Detail your overall competitive strategy; i.e. cost leadership, focus, differentiation, or a combination of any of the competitive strategies and why it was selected.

Data and analysis regarding highpoints from the previous year and decisions that lead to this success.

Data and analysis regarding the biggest challenges and the decisions that led to poor performance. Be sure to describe why it happened and what areas of the business were impacted. Include what you see as two or three key lessons learned.

Note: this section should be approximately 40% of the actual letter's content

Section 2 - Future Vision

Based on your results, construct new strategies for the upcoming year to maximize organizational strengths and overcome weaknesses in results by completing a detailed SWOT matrix along with an analysis of its content. The explanation should include how you believe this new strategy will impact / address the problem areas and which areas of the business will ultimately be effected.

Evaluate and describe any current or potential ethical, legal or sustainable business practices within the business or the industry identified in an environmental scan and VRIO analysis that need to be addressed in the upcoming year and the tactics you have developed to overcome these challenges.

Note: this section should be approximately 50% of the actual letter's content

Section 3 - Leadership Conclusion

Complete the Shareholder Letter with a description of your leadership style/philosophy and why they should continue to invest in you and the firm.

Note: this section should be approximately 10% of the actual letter's content

The letter should be between 9-12 double spaced pages written in business format. Graphs and charts can be embedded into the document. First person is acceptable.

Be certain that conclusions are supported by data and that this is a professionally written document.

\fCOURIER C143438 Round: 5 Financial Summary Dec. 31, 2028 Cash Flow Statement Survey Andrews Baldwin Chester Digby Erie Ferris CashFlows from operating activities $38,061 ($5,226) $2,772 Net Income(Loss $50,540 $408 ($47,434) Adjustment for non-cash items: Depreciation $19,231 $16,487 $7,507 $10, 140 $7,587 $9,300 Extraordinary gains/losses/writeoffs $49 $0 $0 $0 $0 ($550) Changes in current assets and liablilities Accounts payable $3,247 $6,884 ($165) ($4,892) ($50) $2,648 nventory $5,492 $13,623 ($104) $6, 144 ($28,391) ($5,310) Accounts Receivable ($5,424) ($4,851) $519 $2,522 ($2,588 ($1,416) Net cash from operations $73,135 $70,203 $8, 164 $8,688 ($70,877) $7,443 Cash flows from investing activities Plant improvements(net) ($32, 120) ($45,800) $0 $0 SO ($36,470) Cash flows from financing activities Dividends paid ($1,500) ($2,299) ($3,000) $0 $0 $0 $0 $0 $0 150 $8,755 Sales of common stock Purchase of common stock $0 $0 $0 $0 $0 $0 Cash from long term debt issued $0 $25,000 $22,000 so $10,137 $0 Early retirement of long term debt ($10,000) $0 $0 $0 Retirement of current debt ($13,900) ($16,395) ($13,900) ($56,036) ($211,906) $23,652) Cash from current debt borrowing $0 $0 $0 $0 $0 $27,995 $0 $0 $282,782 $0 Cash from emergency loan $25, 198 Net cash from financing activities ($25,400) $6,306 ($16,900) ($8,688) $70,877 $23,235 Net change in cash position $15,615 $30,709 ($8,736) $0 $0 ($5,792) Andrews Baldwin Chester Digby Erie Ferris Balance Sheet Survey cash $19,005 $30,709 $18,385 $0 $0 $28,815 Accounts Receivable $26,730 $48,890 $5,566 $11,264 $5,436 $14,817 Inventory $2,066 $1,899 $3,011 $45,662 $187,329 $17, 170 $60,802 Total Current Assets $47,800 $81,498 $26,963 $56,926 $192,765 Plant and equipment $288,460 $247,300 $1 12,600 $152, 100 $113,800 $156,300 Accumulated Depreciation ($110,209) $97,133) $73,787) ($75, 191) $75,867) $52,440) Total Fixed Assets $178,251 $150, 167 $38,813 $76,909 $37,933 $103,860 $226,051 $231,664 $65,776 $133,834 $230,699 $164,662 Total Asset Accounts Payable $13,977 $18,929 $4,969 $6,110 $5,972 $11, 118 Current Debt $0 $0 $0 $25, 198 $282,782 $27,995 $39,113 Total Current Liabilities $13,977 $18,929 $4,969 $31,308 $288,754 Long Term Debt $72,399 $75,850 $37,350 $64,850 $20,850 $46,097 $86,376 $94,779 $96, 158 $309,605 $85,210 Total Liabilities $42,319 Common Stock $18,360 $30,360 $18,360 $18,797 $18,360 $37,515 $121,315 $106,526 $5,097 $18,880 ($97,266) $41,938 Retained Earnings $79,453 Total Equity $139,675 $136,886 $23,457 $37,676 ($78,906) Total Liabilities & Owners Equity $226,051 $231,664 $65,776 $133,834 $230,699 $164,662 Andrews Digby Erie Ferris Income Statement Survey Baldwin Chester $66, 142 $180,275 Sales $325,210 $297,414 $101,585 $137,039 Variable Costs(Labor, Material, Carry) $175,790 $167,385 $60,717 $85,963 $66,753 $132,018 $149,420 $130,029 $40,868 $51,076 ($611) $48,257 Contribution Margin Depreciation $19,231 $16,487 $7,507 $10, 140 $7,587 $9,300 SGA(R&D, Promo, Sales, Admin) $36,463 $27,899 $22,261 $28,260 $8,733 $20,905 Other(Fees, Writeoffs, TQM,Bonuses) $5, 199 $16,250 $5,600 $7, 108 $4,145 EBIT $88,527 $69,394 $5,500 $5,569 ($16,931) $13,907 Interest(Short term, Long term) $9,186 $9,644 $4,860 $13,610 $56,045 $9,555 Taxes $27,769 $20,912 $224 ($2,814) ($25,541) $1,523 $777 $8 $0 $57 Profit Sharing $1,031 $0 Net Profit $50,540 $38,061 $408 ($5,226) ($47,434) $2,772 CAPSTONE @ COURIER Page 3Round: 5 Annual Report Andrews C143438 Dec. 31, 2028 2028 Income Statement 2028 Common (Product Name) Able Acre Adam Aft Agape Alex Total Size $95,531 $61,519 $51,914 $44,517 $54,706 $17,023 $0 $0 $325,210 100.0% Sales Variable Costs: $8,678 $7,202 $13,309 $9,681 $15,457 $6, 171 $0 $0 $60,497 18.6% Direct Labor Direct Material $32,867 $17,948 $19,965 $18,516 $20,453 $5,296 $0 $0 $115,044 35.4% $0 $0 $248 Inventory Carry $ $5 $243 $0 $0 0.1% Total Variable $41,544 $25,150 $33,280 $28,440 $35,910 $11,466 $0 $0 $175,790 54.1% $36,369 $18,635 $16,077 $18,797 $5,556 $0 $0 $149,420 45.9% Contribution Margin $53,986 Period Costs Depreciation $7,000 $6,300 $1,760 $1,733 $1,877 $560 $0 $0 $19,231 5.9% 0.99 SG&A: R&D $766 $72 $474 $631 $428 $683 $0 $0 $3,053 $1,800 $1,800 $1,700 $1,700 $1,800 $1,000 $0 $0 $9,800 3.0% Promotions $3,500 $3,500 $3,500 $3,500 3,500 $2,400 $0 $19,900 6.1% Sales $1,090 $702 $592 $508 $624 $194 $0 $0 $3,709 1.1% Admin $14,156 $12,374 $8,026 $8,072 58,229 $4,837 $0 $0 $55,693 7.1% Total Period Net Margin $39,831 $23,995 $10,609 $8,005 $10,568 $719 $0 $0 $93,727 28.8% Definitions: Sales: Unit Sales times list price. Direct Labor: Labor costs incurred to produce the product Other $5, 199 1.6% that was sold. Inventory Carry Cost: the cost unsold goods in inventory. Depreciation: Calculated on EBIT $88,527 27.2% straight-line. 15-year depreciation of plant value. R&D Costs: R&D department expenditures for each Short Term Interest $0 0.0% product. Admin: Administration overhead is estimated at 1.5% of sales. Promotions: The promotion budget Long Term Interest $9,186 2.8% for each product. Sales: The sales force budget for each product. Other: Chargs not included in other Taxes $27,769 8.5% categories such as Fees, Write offs, and TQM. The fees include money paid to investment bankers and Profit Sharing $1,031 0.3% Net Profit $50,540 15.5% brokerage firms to issue new stocks or bonds plus consulting fees your instructor might assess. Write-offs include the loss you might experience when you sell capacity or liquidate inventory as the result of eliminating a production line. If the amount appears as a negative amount, then you actually made money Variable Margins on the liquidation of capacity or inventory. EBIT: Eamings Before Interest and Taxes. Short Term Interest: 2028 Andrews C143438 Interest expense based on last years current debt, including short term debt, long term notes that have become due, and emergency loans, Long Term Interest: Interest paid on outstanding bonds. Taxes: Income tax based upon a 35% tax rate. Profit Sharing: Profits shared with employees under the labor contract. Net Profit: EBIT minus interest, taxes, and profit sharing. 20 Alex 2 Adam Agape Profit History C143438 Market Share History C143438 30% $40,000 $20,000 10% 0% 2023 2024 2025 2026 2027 2028 2023 2024 2025 2026 2027 2028 ROE History C143438 Asset Turnover History C143438 1.5 1.0 20 0.5 0% 0.0 2023 2024 2025 2026 2027 2028 2023 2024 2025 2026 2027 2028 ROS History C143438 ROA History C143438 15% 20% 10% 10% 0% 0% 2023 2024 2025 2026 2027 2028 2023 2024 2025 2026 2027 2028 Page 15 Annual Report\fRound: 6 Financial Summary COURIER C143438 Dec. 31, 2029 Cash Flow Statement Survey Andrews Baldwin Chester Digby Erie Ferris CashFlows from operating activities Net Income(Loss) $64,026 $60,813 $9,437 $6,451 ($71,306) $3,926 Adjustment for non-cash items: Depreciation $23,292 $16,487 $7,507 $9.420 $7,587 $11,993 Extraordinary gains/losses/writeoffs ($526) $0 $307 $0 $0 Changes in current assets and liablilities Accounts payable $3,379 ($5,233) $503 $734 $19) $1,652 Inventory ($8,668) ($2,246) $186 $10,001 ($47, 182) ($13,696) Accounts Receivable ($4,217) ($5,786) ($676) ($1,247) $2,326 ($1,944) Net cash from operations $77,285 $64,035 $16,957 $25,666 ($108,595) $1,931 Cash flows from investing activities Plant improvements(net) ($60,920) $0 $3,293 $0 ($23,600) Cash flows from financing activities Dividends paid ($1,700) ($1,639) $0 $0 $0 $0 Sales of common stock $0 $0 $0 $0 $8,974 Purchase of common stock $0 ($15,000) $0 $0 $0 $0 Cash from long term debt issued $0 $0 $10,000 $28,600 Early retirement of long term debt ($30,000) $0 $0 $0 $0 $0 Retirement of current debt $0 $0 $0 ($25,198) ($282,782) ($27,995) Cash from current debt borrowing $0 $0 $0 $26,235 Cash from emergency loan so $0 $391,377 Net cash from financing activities ($31,700) ($16,639) $0 ($15, 198) $108,595 $35,814 Net change in cash position $15,335) $47,397 $16,957 $13,761 $14, 145 Balance Sheet Survey Andrew Baldwin Chester Digby Erie Ferris Cash $3,670 $78, 105 $35,342 $13,761 $0 $42,960 Accounts Receivable $30,947 $54,676 $6,242 $12,510 $3, 110 $16,761 Inventory $10,734 $4, 144 $2,825 $35,661 $234,511 $30,866 Total Current Assets $45,351 $136,926 $44,409 $61,933 $237,621 $90,588 Plant and equipment $349,380 $247,300 $112,600 $141,300 $113,800 $179,900 Accumulated Depreciation ($133,501) $113,620) ($81,293) ($77,411) $83,453) ($64,433) Total Fixed Assets $215,879 $133,680 $31,307 $63,889 $30,347 $1 15,467 Total Assets $261,230 $270,606 $75,716 $125,821 $267,968 $206,054 Accounts Payable $17,355 $13,696 $5,472 $6,844 $5,953 $12,770 Current Debt $0 $20,850 $20,850 $20,850 $412,227 $47,085 Total Current Liabilities $17,355 $34,546 $26,322 $27,694 $418, 180 $59,855 Long Term Debt $41,873 $55,000 $16,500 $54,000 $0 $53,846 Total Liabilities $59,228 $89,546 $42,822 $81,694 $418, 181 $113,701 Common Stock $18,360 $27,033 $18,360 $18,797 $18,360 $46,489 Retained Earnings $183,642 $154,02 $14,534 $25,331 ($168,572) $45,864 Total Equity $202,001 $181,060 $32,894 $44, 127 ($150,213) $92,353 Total Liabilities & Owners Equity $261,230 $270,606 $75,716 $125,821 $267,968 $206,054 Income Statement Survey Andrews Baldwin Chester Digby Erie Ferris Sales $376,519 $332,614 $113,914 $152,210 $37,844 $203,924 Variable Costs(Labor, Material, $203,775 $164,889 $67, 100 $90,095 $53,39' $145,374 Contribution Margin $172,744 $ 167,725 $46,814 $62, 115 ($15,547) $58,550 Depreciation $23,292 $16,487 $7,507 $9,420 $7,587 $11,993 SGA(R&D,Promo, Sales, Admin) $38,647 $41,444 $19,695 $23,755 $8,535 $21,524 Other(Fees, Writeoffs, TQM, Bonuses) $4,924 $5,225 $0 $8,307 $0 $5,629 EBIT $105,881 $ 104,570 $19,613 $20,632 ($31,669) $19,404 Interest(Short term,Long term) $5,369 $9, 102 $4,797 $10,505 $78,033 $13,241 Taxes $35, 179 $33,414 $5, 185 $3,545 ($38,396) $2, 157 Profit Sharing $1,307 $1,241 $193 $132 $0 $80 Net Profit $64,026 $60,813 $9,437 $6,451 ($71,306) $3,926 CAPSTONE @ COURIER Page 3Round: 6 Annual Report Andrews C143438 Dec. 31, 2029 2029 Income Statement 2029 Common (Product Name) Able Acre Adam Aft Agape Alex Total Size Sales $111,500 $72,430 $60,459 $52,152 $55, 156 $24,821 $0 $0 $376,519 100.0% Variable Costs: $9,351 $13,684 $14,888 $8,526 $0 18.3% Direct Labor $10,581 $11,929 $0 $68,960 Direct Material $38,800 $20,411 $23,534 $22,035 $20,604 58, 144 $0 $0 $133,527 35.5% Inventory Carry $25 $0 $275 $82 $879 $27 $0 $1,288 0.3% Total Variable $49,406 $29,762 $37,493 $34.046 $36,371 $16,697 $0 $0 $203,775 54.1% $42,668 $0 $0 Contribution Margin $62,094 $22,966 $18, 106 $18,785 $8,124 $172,744 45.9% Period Costs: $7.840 $7, 140 $2.080 $2,600 $2,912 720 $0 $0 $23,292 6.20 Depreciation SG&A: R&D $754 $647 $496 $486 $485 $467 $0 $0 $3,335 0.9% Promotions $1,700 $1,700 $1,700 $1,700 $1,700 $1,700 $0 $0 $10,200 2.7% Sales $3,500 $3,500 $3.500 $3,500 $3,500 $3,500 $0 $0 $21,000 5.6% $791 $660 $570 $0 Admin $1,218 $602 $271 $0 $4,112 1.1% Total Period $15,012 $13,778 $8,436 $8,856 $9,199 $6,658 $0 $0 $61,939 16.5% Net Margin $47,082 $28,890 $14,530 $9,250 $9,58 $1,466 $0 $0 $110,805 29.4% Definitions: Sales: Unit Sales times list price. Direct Labor: Labor costs incurred to produce the product Other $4,924 1.3% that was sold. Inventory Carry Cost: the cost unsold goods in inventory. Depreciation: Calculated on EBIT $105,881 28.1% straight-line. 15-year depreciation of plant value. R&D Costs: R&D department expenditures for each Short Term Interest $0 0.0% product. Admin: Administration overhead is estimated at 1.5% of sales. Promotions: The promotion budget Long Term Interest $5,369 1.4% or each product. Sales: The sales force budget for each product. Other: Chargs not included in other Taxes $35, 179 9.3% categories such as Fees, Write offs, and TQM. The fees include money paid to investment bankers and Profit Sharing $1,307 0.3% brokerage firms to issue new stocks or bonds plus consulting fees your instructor might assess. Write-offs Net Profit $64,026 17.0% nclude the loss you might experience when you sell capacity or liquidate inventory as the result of eliminating a production line. If the amount appears as a negative amount, then you actually made money Variable Margins on the liquidation of capacity or inventory. EBIT: Eamings Before Interest and Taxes. Short Term Interest: 2029 Andrews C143438 Interest expense based on last years current debt, including short term debt, long term notes that have become due, and emergency loans, Long Term Interest: Interest paid on outstanding bonds. Taxes: Income tax based upon a 35% tax rate. Profit Sharing: Profits shared with employees under the labor 40 contract. Net Profit: EBIT minus interest, taxes, and profit sharing. 20 Able Alex Agape Adam Profit History C143438 Market Share History C143438 $60,000 30% $40,000 20% $20,000 10% 50 0% 2023 2024 2026 2028 2023 2024 2026 2028 ROE History C143438 Asset Turnover History C143438 1.5 20% 1.0 0. 0% 0.0 2023 2024 2026 2028 2023 2024 2026 2027 2029 ROS History C143438 ROA History C143438 20% 10% 10% 0% 0% 2023 2024 2026 2028 2023 2024 2026 2028 Annual Report Page 15