Deliverables: 1} Written report with the following content: I Appendixl: Leasing I Explain the calculations I Your recommendations I Appendix 2: Benchmarking I Explain the comparisons of ratios you calculated against industry values I Provide recommendations on how to improve three of them I Appendix 3: CUP I Explain your calculations I Provide a recommendation I Appendix 4: MCM I Explain your calculations I Provide a recommendation I Formatting specifications: I Executive summary [1 page] I 1000 words maximum [excluding executive summary} I Calibri or Arial font I 11 point I Line spacing 2 I Header and footer I Cover page I Table of Contents [formatted using MS Word] 2} Excel Workbook showing calculations: I Blank format is provided I Complete one Excel tab for each scenario 'y'G'y'l 352-01523 capstol'c Vii] Appendix One (Construct or lease) Objective: Should FFT lease or construct their own production facility Option 1: Construct Costs to incur: Buying land; construct building and getting ready 5 900000 for use {FFT has these funds available in their bank account today so no mortgage is needed} Taxes; insurance, and repairs [per year] Intended years of use 15 Projected market value in 15 years 5 1500.000 Option 2: lease Intended years of use 15 Deposit required today [this deposit will be 5 50,000 returned to FFT when the lease contract is complete is 15 years} Annual lease payment 5 120000 Property taxes [annual] to be paid by FFi Insurance (annual: to be paid by FFT Required rate of return 10% Methodology: The consulting team is proposing to perform a NPl-Jr analysis and determine the benefit to leasing or construction. Based on the analysis, they will recommend the preferred option [construction or leasing]. Appendix Two {Benchmarking studies) Objective: To conduct ratio analysis of a comparable company {Waterloo Corporation} and compare with that of the industry. FFT Corporation Comparative Statements of Financial Position 31 Dec>20 Assets M Cash 50,000 Accounts receivable 55,000 Merchandise inventory 60,000 Prepaid Expenses 55,000 Property, plant, and equipment 300 000 1 Total assets 530 000 Liabilities and shareholders' equity Accounts payable 25,000 30,000 Shortterm bank loan payable 50,000 65,000 Bonds payable 150,000 160,000 Common shares 150,000 95,000 Retained earnings 125 000 75 000 _ Total liabilities and shareholders' equity .5500M .3125000 FFT Corporation Income Statement Year Ended December 31, 2020 Net sales 350,000 Cost of goods sold 210 000 Gross prot 140,000 Expenses Operating expenses Amortization expense Interest expense Total expenses Profit before income tax Income tax expense Profit Additional information for 2020: 1 Cash dividends declared and paid. 2 Net cash provided by operating activities in 2020 Methodology: I Based on the above information the consulting group will conduct ratio analysis for the specific ratios listed in the template. I As a next step the group will compare the ratios calculated above with industry,' benchmarks; The benchmarks are indicated within brackets besides each ratio. 0 Current ratio [3 to 1} Quick ratio [2 to 1] Inventory,' turnover [3 times] Receivables turnover [8 times} Times interest earned {8 times] Deb to equity ratio {3 to 1] Profit margin [14%] Gross profit margin [38%] Days in inventory [110 days] Days in receivables [58 days} Return on assets [12%] Return on equity {14%} Cash current debt coverage ratio [1 time] GOOD-00000000 nuuu-n |__au._-. _'__a LLIP).QIIL u\"..- Appendix Three (CostVolumeProfit Analvsis} Objective: Based on the following Contribution Margin Income Statement the consulting group would like to evaluate if adding sales expenses as a xed cost would be a beneficial strategy. Scenario: Projected Contribution Margin Income Statement Sales volume of packaged food itemslunits} 50,000 Revenue 5 900,000 Variable expenses 5 600,000 Contribution margin 5 300,000 5220.000 Net Operating Income 5 80,000 Methodology: The consulting group would assume that all packaged food items sell at the same price per unit. The above model assumes that sales commission is a variable expense and that salespersons are paid for each unit they sell. In order to incentivize salespersons, the consulting group is proposing that salespersons be hired on salary and not on commission basis. Combine this with additional advertising, the fixed expenses would increase to S 250,000. This would also lead to an increase in revenue to the extent of 50% and net operating income by 20%. Variable expenses would not increase at the same rate as revenue. The group will calculate the breakeven sales units and breakeven sales dollars under both the current scenario underthe proposed scenario. The group will also complete the CM format income statement for the proposed scenario, as well as calculate the new CM ratio for the proposed scenario and the percentage increase in sales needed to break-even {percentage increase in break-even from the current scenario to the proposed scenario]. They will also advise the business partners on potential risks that may arise in this case and recommend if this approach of adding fixed cost related to selling is recommended. Appendix Four (Multi channel marketing] Objective: To maximize output from packaging machines, the sales volume of packaged foods needs to increase. In order to increase sales, all possible channels will be explored. This includes accepting high volume, one-time orders {or "special orders"}, where the selling price will be lower than that of the regular selling price. The goal is to evaluate at what price can the special orders be accepted. 5c enario: The consulting group has developed the following cost structure for packaged foods. This is based on a production capacity of 30,000 units. The unit selling price is set at $50. The xed manufacturing expense is constant in the range of 25,000 to 50,000 units. The maximum production capacity is 30,000 units. Item Per Unit Total Direct materials 16 430,000 Direct labour 5 150,000 Variable Manufacturing Overhead 5 150,000 Fixed manufacturing overhead 9 220,000 Variable Selling Expense B 240,000 Fixed Selling Expense 3i. 90,000 Due to market conditions, FFT can sell 20,000 units through regular channels. They plan to offer a quote to a large manufacturing facility to sell 5,000 units ofthe packaged food item, at a lower price. This would be a one-time order and can be classified as a special order. Since this would be sold directly to the client, there would be no sales commission, so variable selling expense would be reduced by 25%. However, FFI' has to buy freezer boxes so that the frozen items ca n be transported to the manufacturing facility. The freezer boxes would cost 5 20,000 and would be used solely forthis special order. After that they would have no residual value and would be discarded. Methodology: The group would calculate the offer price. The offer price will cover all variable expenses and include a 40% markup on variable expenses. MGMT 8500: 523 -capstone -V10 Delivery: Upload both the written report and the Excel workbook to the assigned folder in eConestoga. . One submission per group . Your Professor will advise you as to the due date of this assignment. Marking Key and Rubric: Included within the Excel workbook. Please review all items in the marking key before submission and ensure they are complete. . All group members will receive the same grade if indicated likewise in the peer review form