Congratulations on becoming consultants for the SCOTSMAN Company! Your assignment is to complete a feasibility study for the "new product" introduction into their existing product line for the company $($a new product$).$ The company is located in Canton, Georgia and the company makes a variety of wood products such as cabinet making. However, this will be their first look at expanding into another market but they suspect it might be feasible.

First design your products then perform a Market Study: Open the Project Specs Word document in Start Here. After reading what is given to you, find where your product fits into the market of other competitors. Capture their images and retail prices. Estimate the cost of your own products using the Bill of Materials. This will give you a good idea of where you fit into the market. Please keep in mind that the cost to manufacture your products are not known yet, so allow some flexibility in your market pricing.

Size of Factory Area: The company does have some unused space that is currently available for immediate occupancy. The unused space is a $15,000$ square foot area and its exact dimensions are $100$ feet by $150$ feet. You should plan to utilize part or all of this space for the whole operation.

Overhead Services: Since the company has its offices at the Canton, Georgia location, it is expected that most of the overhead services such as accounting, billing, medical, etc. can be done by existing personnel at no additional cost to the company. However, the feasibility study must contain estimated costs for items such as utilities. In the past the company has used a percentage of the direct labor cost to estimate these types of costs. If you choose to use a percentage then be sure to state the services that the percentage includes for the operation.

Rate of Return $($ROI$)$: The company must price its products so that they yield a minimum $35\%$ after tax ROI over a five$-$year planning horizon. PLEASE NOTE THAT YOU WILL NOT HAVE ALL THE DATA YOU NEED YET TO CALCULATE ROI. YOU WILL ONLY HAVE MATERIAL COST AND A GOOD IDEA OF SELLING PRICE. DO THE BEST YOU CAN TO ASSURE $>35\%$ AT THIS POINT.

$-$ Your product must be priced to give the $35\%$ ROI.

$-$ Although not a rigid criteria, the company would like to have a yearly breakeven point of seven months or less by the fourth year of production.

$-$ The new product must stand on its own financially.

Therefore, please make every effort to assure the company that the new operation is not being subsidized by any of the other products the company makes.

Annual Return on Investment is calculated by dividing Net Profit After Taxes by the amount of the total investment. Multiply by $100$ to convert a decimal value into a percent.

For this project the required ROI is a minimum of $35\%$ for the entire five year period $($not $35\%$ per year$).$ This is calculated by adding the Net Profit After Tax each year for all five years to yield the total Net Profit After Tax for five years. This total is then divided by the amount of the total investment $($total of all money invested$)$ and multiplied by $100$ to yield an ROI percentage.

Loan Interest Rate: You may assume that the company will supply all the investment capital that will be required.

Their current interest rate for borrowed funds is $6\mathrm{.}0\%$ and this should be included in the study.

Annual Sales Demand in Units for Each of the Next Five Years

A national marketing study for the two models has been completed and the company wishes to

make the following number of units each year $($see Word document for the demand$).$

Hourly Output per Year: In years $2$ through $5$ use $1,920$ hours per year $(240$ days x $8$ hours per day$).$ However, for year $1$ only use $1,520$ working hours per year because it will take approximately $10$ weeks to purchase and install equipment, hire and train people, and get the first products completed and shipped to your customers.