escription three units of study, there will be application focused cases due at the beginning of the class that will be provided by the instructor. These cases will be complex in nature and will require the application of course concepts to real word business situations. Each case will have an associated rubric to highlight expectations. All submissions must be of professional quality and done in Microsoft Word Microsoft Excel or submitted as a POF Case: Investment Proposals for Ontario Coffee Home tis january 1, 2019. You are a Senior Analyst at Ontario Coffee Home (one of the leading coffee chains and wholesaler of coffee bakery products in Ontario. The roof Ontario Coffee Home, jerry Donovan, has reached out to wou to draft a report to evaluate two investment proposals. Requirements 1 Identify which revenues and costs are relevant to your analysis and which costs are irrelevant. Surmare all the information that wil be required for each investment proposal including describing the proposal and identifying the time horizon for each proposal evaluation 2. Calculate the ser tax cash flows during the life of each of the projects 3. Duling the after-tax cash flows from question 2. evaluate each investment proposaltung the following criteria unless directed otherwise Payback Clearly indicate whether any of the above criteria support each of the project proposals and what the company should timely decide to do Investment Proposals Jerry Donovan CEO of OCH wants you to evaluate two investment proposals that the company is considering 1. The purchase of a coffee roaster plant in Cuba 2. The re-development of coffee shops to accommodate the selling of frozen yogurt Mr. Donovan reminds you that only relevant costs and revenues should be considered. "Relevant costs have to be occurring in the future." explained M. Donovan. "And have to differ from the status quo. For example, if we choose to buy the roaster plant, it is only the incremental revenue and costs related to the purchase that should be considered. We also need to take into account the opportunity cost associated with the alternatives. More details on each investment proposal are included below. Mr. Donovan wants you to recommend it should invest in one both or none of the investment proposals Required Return Mr. Donovan wants you to use as the discount rane ile the required return Investment in Roasted Coffee Plant Mr. Donovan is considering purchasing a coffee plant in Cuba where labour is cheap and there are proximal coffee farms to help lower transportation costs The acquisition price of the plant is 56. which includes roasting equipment that originally cost $10M when it was purchased years ago. Some of the equipment is on its lastesso an additional M of equipment to be purchased the roaster plant currently has $2M of available tax shield left, excluding any tax shield related to the equipment to be purchased The direct materials and direct labour used to manufacture these products are and of sales, respectively. The actual roasting process are approximately 17 of These costs as a percentage of sales are expected to remain consistent over the thon the plant also requires two managers with red of 50.000 euch peryence for the plant and equipments $40.000 per year Other incremental mandacturing overhead costs property maintenance, security, etc. edding deprecare estimated to be 575.000 annually wages are expected to increase with ination Bestimated to be over the time period, while other fed costs are expected to remain steady Transportation variable costs as variable overhead, etc are somated to be more and incorporation of raw mater to the roaster and finished products to the port for every to come out The roasted coffee plant is expected to produce 1.1M bounds of coffee for the first two years we production done by 100.000 pounds per year after this due to lower productivity from the deteriorating equipment. Each pound of roasted coffee can be sold at 3.25 per pound thertoret cafes franchise cate or to wholesale partner with the price expected to won over time ach pounds of coffee verage ret price of 5400 per cup. Mr. Donovan has stressed that the profitability of the plant base has to be looked aton standalone basis. e. from the sales from the plant to buyers not from relates to customer Mr. Donovan wants to see the project will reach profitability years agricantesentereded after tvey to keep the plant operation she wants you to the return on instant strat period using the investment of payback period and The following table within the actions of the held for the new coment Mr. Donovan wants to see if the project will reach profitability after 5 years, as significant reinvestment will be needed after five years to keep the plant operational, so he wants you to evaluate the return on investment in that period using the investment criteria of payback period. NPV, and IRR. The following table will help in the calculations of the tax Shield for the new equipment: Class CCA Rate Description 113 30% Machine and equipment to manufacture and process goods for sale Tax Shield Formula Initialement rate Tax Rate (Discount Rate + CCA Pate) (1 + Dinant Hote) Assume no salvage value when calculating the tax shield, and that the half-year rule applies for Class 43. The tax rate Mr. Donovan wants you to utilizes 25. When calculating the tax shield. The presentate should be in the same period as the initial investment Year 1 which she means that deprecatione.CCAshould not be taken from the cash flows in subsequent years since the tax shelter effects are ready accounted for the Redevelopment of Coffee Shops Mr. Donovan also wants you to evaluate the potential of developing several hundred stores into new store models with free yogurt services. Five Hundred stores have been selected as candidates for development 80.000 to converteach store including modifications to refrigeration equipment with these costs being capitalized with an applicable CCA rate. The average modified coffee shop is expected to generate an additional $30.000 intera cash flow every year. However, OCH is estimated to lose about $15.000 in annual after tax cash flow from these cafes due to yogurt scanning existing coffee shops in other words some customers who would have purchased coffee would instead purchase yogurt The five hundred stores have average annual rent of $35.000 each. Mr. Donovan wants you to evaluate the profit of this investment after a seven-year period using the investment of NP escription three units of study, there will be application focused cases due at the beginning of the class that will be provided by the instructor. These cases will be complex in nature and will require the application of course concepts to real word business situations. Each case will have an associated rubric to highlight expectations. All submissions must be of professional quality and done in Microsoft Word Microsoft Excel or submitted as a POF Case: Investment Proposals for Ontario Coffee Home tis january 1, 2019. You are a Senior Analyst at Ontario Coffee Home (one of the leading coffee chains and wholesaler of coffee bakery products in Ontario. The roof Ontario Coffee Home, jerry Donovan, has reached out to wou to draft a report to evaluate two investment proposals. Requirements 1 Identify which revenues and costs are relevant to your analysis and which costs are irrelevant. Surmare all the information that wil be required for each investment proposal including describing the proposal and identifying the time horizon for each proposal evaluation 2. Calculate the ser tax cash flows during the life of each of the projects 3. Duling the after-tax cash flows from question 2. evaluate each investment proposaltung the following criteria unless directed otherwise Payback Clearly indicate whether any of the above criteria support each of the project proposals and what the company should timely decide to do Investment Proposals Jerry Donovan CEO of OCH wants you to evaluate two investment proposals that the company is considering 1. The purchase of a coffee roaster plant in Cuba 2. The re-development of coffee shops to accommodate the selling of frozen yogurt Mr. Donovan reminds you that only relevant costs and revenues should be considered. "Relevant costs have to be occurring in the future." explained M. Donovan. "And have to differ from the status quo. For example, if we choose to buy the roaster plant, it is only the incremental revenue and costs related to the purchase that should be considered. We also need to take into account the opportunity cost associated with the alternatives. More details on each investment proposal are included below. Mr. Donovan wants you to recommend it should invest in one both or none of the investment proposals Required Return Mr. Donovan wants you to use as the discount rane ile the required return Investment in Roasted Coffee Plant Mr. Donovan is considering purchasing a coffee plant in Cuba where labour is cheap and there are proximal coffee farms to help lower transportation costs The acquisition price of the plant is 56. which includes roasting equipment that originally cost $10M when it was purchased years ago. Some of the equipment is on its lastesso an additional M of equipment to be purchased the roaster plant currently has $2M of available tax shield left, excluding any tax shield related to the equipment to be purchased The direct materials and direct labour used to manufacture these products are and of sales, respectively. The actual roasting process are approximately 17 of These costs as a percentage of sales are expected to remain consistent over the thon the plant also requires two managers with red of 50.000 euch peryence for the plant and equipments $40.000 per year Other incremental mandacturing overhead costs property maintenance, security, etc. edding deprecare estimated to be 575.000 annually wages are expected to increase with ination Bestimated to be over the time period, while other fed costs are expected to remain steady Transportation variable costs as variable overhead, etc are somated to be more and incorporation of raw mater to the roaster and finished products to the port for every to come out The roasted coffee plant is expected to produce 1.1M bounds of coffee for the first two years we production done by 100.000 pounds per year after this due to lower productivity from the deteriorating equipment. Each pound of roasted coffee can be sold at 3.25 per pound thertoret cafes franchise cate or to wholesale partner with the price expected to won over time ach pounds of coffee verage ret price of 5400 per cup. Mr. Donovan has stressed that the profitability of the plant base has to be looked aton standalone basis. e. from the sales from the plant to buyers not from relates to customer Mr. Donovan wants to see the project will reach profitability years agricantesentereded after tvey to keep the plant operation she wants you to the return on instant strat period using the investment of payback period and The following table within the actions of the held for the new coment Mr. Donovan wants to see if the project will reach profitability after 5 years, as significant reinvestment will be needed after five years to keep the plant operational, so he wants you to evaluate the return on investment in that period using the investment criteria of payback period. NPV, and IRR. The following table will help in the calculations of the tax Shield for the new equipment: Class CCA Rate Description 113 30% Machine and equipment to manufacture and process goods for sale Tax Shield Formula Initialement rate Tax Rate (Discount Rate + CCA Pate) (1 + Dinant Hote) Assume no salvage value when calculating the tax shield, and that the half-year rule applies for Class 43. The tax rate Mr. Donovan wants you to utilizes 25. When calculating the tax shield. The presentate should be in the same period as the initial investment Year 1 which she means that deprecatione.CCAshould not be taken from the cash flows in subsequent years since the tax shelter effects are ready accounted for the Redevelopment of Coffee Shops Mr. Donovan also wants you to evaluate the potential of developing several hundred stores into new store models with free yogurt services. Five Hundred stores have been selected as candidates for development 80.000 to converteach store including modifications to refrigeration equipment with these costs being capitalized with an applicable CCA rate. The average modified coffee shop is expected to generate an additional $30.000 intera cash flow every year. However, OCH is estimated to lose about $15.000 in annual after tax cash flow from these cafes due to yogurt scanning existing coffee shops in other words some customers who would have purchased coffee would instead purchase yogurt The five hundred stores have average annual rent of $35.000 each. Mr. Donovan wants you to evaluate the profit of this investment after a seven-year period using the investment of NP