Finance case

Farmers Market Co FMC) Ahmad Yousef, the marketing manager of Farmers Market Co. a memo to the CEO wrote suggesting that FMC might be able to increase its profits substantially if it introduced a new product-Tahini that can be distributed through all cooperatives in Kuwait. The CE responded positively to the but approval the financials have been worked out to that expected profits new product enou return on the required capital investment. FMC is very successful, profitable, and has been in the business of organic products for over 10 years but it FMC does not own a land to build the plant to manufacture the Tahini, can lease existing facilities for 5 years at KD 325,000 per year. company CFo prepared The the preliminary estimates below: Tablel limina Profitability Estimates Total Sales(100,000 units at KD1000 10,000,000 Cash Ex Total Cost of goods sold 100,000 barrels at KD 58) 5,800,000 Plant lease 325,000 Marketing expenses 253,000 Other expenses Total expenses Contribution to profit Equipment Required 1,275,000 New equipment to be purchased 15,000 Old equipment to be moved 25,000 Cost of moving and installation Total capital cost Payback period 1,315.000 0.40 years 4.75months 3,322,000 arketin ated Sales Annual sales Marketing Units Revenue Expenses 50,000 5,000,000 87,000 Existing Facility 60,000 6,000,000 287,500 75,000 7,500,000 287,000 Year 1 100,000 10,000,000 253,000 Year 2 Year and after Page 1 of 3