General Information about problem:

Richelieu Specialty Paints Richelieu Specialty Paints is a company run by Amanda Richelieu. She is an artist and earned a BA degree with a major in Art and Design. The company was founded by Amanda's father and he recently asked her to take over managing it so that he could retire. Amanda agreed and left her interior design job with an architecture firm to assume the role. She is keen to develop the business further.

The company makes a wide variety of paints, mostly targeted at fine artists. However, since Amanda has had experience in interior design she has determined that the company could apply its skills to develop new products for that industry and others.

She knows that she hasn't yet developed her quantitative analysis skills to the point they need to be to run a company, so she is seeking assistance with four decisions that she needs to make. She would like to have a report from you providing recommendations for each decision, along with the background calculations that support your decisions.

Decision 1: Marketing - Advertising Placement Amanda has a yearly advertising and promotions budget of $50,000. Her goal is to maximize the reach (the number of customers that see her company's ads or other marketing efforts).

She is considering a mix of placing ads on art websites and in printed art magazines, as well as using targeted social media ad placements and appearances at art tradeshows. She wants to make sure that the company has an online presence, so would like to see at least 100 ads placed in any combination of websites and social media per year. However, she has data that suggests that if she advertises on the websites more than 60 times per year she will be wasting money. There are seven art tradeshows that the company could attend, but Amanda feels it is mandatory to attend at least the two most popular tradeshows. There are three major art magazines, each published monthly, that Amanda would like to advertise in. She could advertise in each of these once per month but would be comfortable reducing the frequency to a minimum of once every three months in each magazine and rotating the placements between the magazines.

The reach and cost of each type of ad placement or event is shown below: Art Websites, Social Media, Art Tradeshows, and Print Magazine Ads. Reach (number of people)

Art Websites: 14,000 - Reach (number of people) ; 200 - Cost (dollars)

Social Media: 12,000 - Reach (number of people); 250 - Cost (dollars)

Art Tradeshows: 5,000 - Reach (number of people); 1,000 - Cost (dollars)

Print Magazine Ads: 10,000 - Reach (number of people); 400 - Cost (dollars)

Recommend the appropriate mix of advertising and promotions for the company. Also comment on what would change if Amanda doubled her advertising and promotions budget. Estimate the increased reach.

REQUIRED - questions to be answered in Excel.

Richelieu Specialty Paints has been quite successful and has $1,500,000 cash to be invested. Amanda and her management team have developed four potential investments in addition to leaving the cash in a low interest deposit. The four new opportunities are:

1. Purchase some shares of a major supplier (25% risk of total loss, 13% potential return)

2. Invest in the research and development of a new product (50% risk of total loss, 60% potential return)

3. Buy a selection of corporate bonds (10% risk of total loss, 6% potential return)

4. Buy a selection of government bonds (1% risk of total loss, 3% potential return)

Leaving the money in a low interest deposit is virtually riskless and has a 0.5% potential return. Richelieu's father had provided Amanda with some guidelines for investment, aimed at diversification and risk management.

These are:

1. Invest a maximum of 40% of the total cash in any one of the four new opportunities to ensure some risk control.

2. Invest at least $100,000 in each of the four new opportunities to ensure some diversity.

3. Limit the total potential loss, on average, to $250,000, based on the risk factors indicated.

4. Ensure the highest return possible.

Recommend the appropriate mix of the four investments and note how much money, if any, should be left in the low interest deposit. Also, how would this mix change, and what would happen to potential return, if Amanda decided to take a more conservative approach and limit the total potential loss to $175,000.