From the case study below:

Conduct a Quantitative and Qualitative analysis

Write recommendations on whether the company should move forward with the expansion, with consideration towards both financial and non-financial factors:

InnovAppliance, a dynamic and innovative small-scale home appliance manufacturing company based in Vancouver, Canada, has experienced remarkable success in the domestic market. Renowned for its cutting-edge designs, energy efficiency, and integration of artificial intelligence technology, InnovAppliance is now set to embark on an expansion into new markets. The companys CEO, Peter Gallagher, has identified an opportunity to expand into the thriving Israeli market. However, this expansion requires additional funds that the company will need to raise through either debt or equity financing. As the CFO of InnovAppliance, your role is to evaluate the various issues below, provide recommendations on the expansion and optimal financing approach, as well as address the ethical dilemma of sustainability in the expansion process. InnovAppliance has captured the attention of consumers with its game-changing home appliances that combine functionality, style, and the power of artificial intelligence. These smart appliances incorporate advanced AI technology, enabling users to interact with their appliances through voice commands, smartphone apps, and intelligent automation. For instance, the company's AI-powered refrigerator uses computer vision to recognize and track food items, provide recipe suggestions, and optimize energy usage based on user preferences. Having experienced some recent blood pressure concerns, Peter is especially interested in using this functionality to help motivate him on his own journey towards living a healthier lifestyle and has recently launched a new marketing campaign using the slogan MotivAte Me. He is worried that the company is spending too much on marketing but believes this will pay off in the long run. The companys AI-enabled home appliances have attracted widespread acclaim for their ability to enhance convenience, energy efficiency, and user experience. With a focus on energy efficiency and sustainability, InnovAppliance has become a trusted brand among environmentally conscious consumers. InnovAppliance's most recent set of financial statements is in APPENDIX B below:

A. Expansion: With the domestic market becoming increasingly competitive, InnovAppliance has identified Israel as a promising market for its products. Israel boasts a growing economy, a tech-savvy population, and a strong demand for smart home appliances. By expanding to Israel, the company aims to tap into new customer segments and leverage the country's tech-oriented culture. The CEO believes that establishing a presence in Israel will enhance the companys global footprint and strengthen its position as an international player in the home appliances industry. However, at the most recent board meeting, the Chairman of the Board, Lars Ericsson, has voiced some concerns about expanding into Israel due to the financing required, cultural differences, quality concerns and regulatory considerations. The CEO would like an analysis and recommendations on whether the company should move forward with the expansion, with consideration towards both financial and non-financial factors. The companys controller has prepared a detailed breakdown of the incremental start-up costs, and a 5-year projection of revenue and operational costs associated with the expansion.

APPENDIX B: Expansion - Financial Details

The controller has put togethersome projections associated with the expansioninto Israel. The breakdown of the expected start-up costs for this project include:

• Equipment: The company plans to rent their manufacturing space, but would need to incur

$1,000,000 for the purchaseof new equipment.

• Marketing and Advertising Expenses: InnovAppliance plans to allocate $500,000 for marketing and advertising campaigns targeted at the Israeli market. This includes promotional activities, market research, and advertising campaigns to create brandawareness and attractcustomers.
• Research and Development Costs: Over the last 2 years the company has spent $185,000 on travel and research & development related costs. To adapt the products for the Israeli market and meet local regulatory requirements, InnovAppliance anticipates incurring another$300,000 in research and development costs. This includes product modifications, certifications, and testing.
• Distribution and Logistics Expenses: Establishing distribution channels and ensuring efficient logisticsin a new marketinvolve additional costs.InnovAppliance estimates that it will need to allocate $200,000 for distribution network setup, transportation, warehousing, and order fulfillment in Israel.
• Legal and Regulatory Fees: Expanding into a new country requires legal and regulatory compliance. InnovAppliance expects to spend $100,000 on legal and regulatory fees for market entry,permits, licensing, and compliance with Israeli regulations.
• Administrative Costs: Additional administrative costs are anticipated for managing operations in Israel. These costs include setting up a local office, hiring local staff, and complying with local administrative requirements. InnovAppliance estimatesthat it will need to allocate $150,000 for administrative expenses associated with the expansion.
• Financing costs:Depending on the financing option the companydecides to pursue, there couldbe additional interest expense that the company will need to incur.

The revenueprojections for the expansion into Israel in the first5 years are as follows:

• Year 1: InnovAppliance expectsto generate $3 million in revenues from the Israelimarket.
• Year 2: The companyanticipates a growth rate of 20% in the Israeli market.
• Year 3: The company projects further growth of 15% in the Israelimarket.
• Year 4 & 5: The company expects10% growth per year.

Going forward if the company uses the new cheaper Israeli suppliers, they expect the gross profit % to increase by 8% in comparison to the 2022 operations in Canada. Annual labor costs are 10% higher in Israel, however the remaining operating expenses are expected to fall in line with the same % of sales as Canadian operations. The Israeli tax rate is expected to be 50% of the Canadian tax rate.