I WANT TO SEE ALL THE CALCULATIONS. WOULD BE HAPPY IF EXCEL FILE IS PROVIDED Andrea Lopez is finishing her degree at the University of Saskatchewan. She is interested in commercializing a small device she designed. The device automates the process of insect trapping and counting in an orchard. The device allows the users to monitor insert counts continuously from a computer or a smartphone to detect insect problems earlier and spray pesticides more efficiently. This will result in better pest control, reduced usage of pesticides, and increased fruit yields. Her design leveraged many off the shelf components and open-source resources to minimize the development cost, and to make eventual production easy. The development to date has cost Andrea $20, 000 to generate two functional prototypes. Andrea tallied her time on the development, 600 hours of labor for design, assembly, and testing. She estimated her time should be worth about $50/ hour (a total of $30, 000). Andrea is weighing whether to set up a company herself or to license the technology out for a company. To start a company on her own, she planned to sell directly to consumers through her own personal website. Based on her interactions with potential users, the price will be around $100 per unit. She anticipates a minimum of 500 units per can be sold. Her mentor Lisa Adams had pointed out that Grow Intelligence has been interested in their product line and interested in producing and selling her device for an annual licensing fee of $100, 000 immediately to form a partnership for production. In the meeting with Grow, Andrea learned that Grow had conducted a market study through a marketing research firm Forward DXI. The market research cost Grow $65,000. It indicated that the device has a market potential of at least 80, 000 units in North America, and at least 200, 000 units worldwide. The prices for end users were estimated in the range of $90 to $120 per unit. This information encouraged Andrea and Grow to consider partnership in bringing the technology to market. Jointly the engineer David Wu at Grow worked with Andrea to take the technology through the manufacturing verification process. To generate this information, David and Andrea each spent 60 hours working. Davids pay rate is $75/hour. A total of 40 pre- production units were produced to generate the cost of production. The total material used for the 40 units was $1, 250 and labor cost was $7, 500 in total. David had also worked with his suppliers that an equipment can be purchased to automate the process of production, which would further reduce the labor cost by 80%.

2 The material cost can be reduced by 70% when produced at scale. The automation equipment costs $500, 000 to purchase and install. Furthermore, an initial investment of $100, 000 is needed for the fixtures to get production going. Grow is interested in producing the device. The VP of Marketing Liam Williams believes that 7,500 units can be sold in the first year, and the sales will be doubled each year. He also believed that Grow could distribute the products through its distribution channels. This means the product will be sold as an additional offering of Grow in its product lines by all its distributors. The marketing expense will be minimal ($3.5 per unit sold estimated). To work with the distributors, Grow will need to sell its products at a 50% discount to leave room for the distributors to have adequate mark-ups and still sell the products at the manufacturer's recommended price (MSRP) between $90 and $120. The CEO of Grow, Luca Jia, asked you to conduct a five-year economic analysis using Liams estimation on sales to determine if the investment would be a good opportunity. Questions 1. What is the fixed capital cost for starting the business for Grow Intelligence? 2. There is an opportunity for sustainable development focused grant (up to $150, 000). The grant will have no interest attached (0% discount rate). To qualify, the company must identify the potential impact on Sustainable Development Goals. Using the Canadian SDG (Sustainable Development Goals) indictor framework, identify the SDGs impacted. 3. Determine the Weighted Average Cost of Capital (WACC) of Grow if the companys current Cost of Capital is at 20%. Assuming the company will get full amount of the SDG grant ($150, 000) if the project is positively related to SDGs. 4. Determine the range (depending on selling price) for the projects Net Present Value based on the WACC calculated from the previous step. 5. Recommend whether to go with the idea or not.

SOLUTION SHOULD BE SIMILAR TO THIS

- Introduction - Discussion - Conclusion - References - Appendix (or Appendices) - Font: Times New Roman - Font Size: 12 - Line Spacing: 1.5 - Main body of memo: Page limit of 4 - References: No page limit - Appendix (or Appendices): No page limit - For tables, title must be above the table, and table should be left aligned or centred to the middle of the page. - For figures, title must be below the figure, and figures should be left aligned or centred to the middle of the page. - Both Tables and Figures, must be numbered in order of appearance. - Page number at bottom centre of page with following format; Introduction Provide brief overview of what this memo is about, and what you are trying to do. If, applicable, then, provide some background information about the problem. Do NOT provide specific details about the problem, this section is only intended for providing an outline of the case study and your memo. The ideal length of this section should be about one or two paragraphs. Discussion Provide a detailed explanation for the methodology used to conduct your analysis. You may use the following points as a reference while discussing your methodology. Equations, tables, or figures that were used in your analysis. Essentially, explain why these equations, tables, or figures are relevant to your analysis. Appropriately state all assumptions made. You must answer all questions that are posted at the end of each case study. All relevant tables, figures, or charts, which do not fit in the main body of the memo must be attached to the appendix (or appendices) and referred in the main body of the memo. The ideal length of this section should be about two to three pages. Conclusion Accurately summarise your analysis in this section. Your conclusion must contain the answers to the key questions posted at the end of each case stucy. The ideal length of this section should be about two or three paragraphs. APPENDIX (OR APPENDICES) Appendix must begin on a new page. If you choose to have more than one appendix, i.e., APPENDIX A, APPENDLX B, APPENDIX, C or more, then, each appendix must begin on a new page. If applicable, you should at least show sample calculations in the appendix. There is no page limit for appendix (or appendices) A company is considering a new business initiative. A current customer has asked the company to supply a new widget at $10/ unit for the next five years. To date, a total of $20,000 worth of time had been spent on the widget. To move forward, the company will need to purchase a machine worth $25,000 for the project. At the end of the contract, the salvage value of machine is estimated to be $5,000. The maintenance costs are projected to be $750 per year. If the company's cost of capital is 10%, should they accept the contract? The contract dictates the number of units to be supplied over the next five years are listed below. Table 1 - Projected Units Sold The production information is estimated as following: Table 2 - Cost Estimation at Project Initiation Due to this is to fulfill a contract, assume cost of marketing or administrative will be minimal. Income will be Sales - Cost of Goods Sold. Note: depreciation is not a cash flow. A=$6,250from14G=$1,600from14F(t=5)=$4,650NPV=(25K)+6,250(P/A,10%,4)+1,600(P/G,10%,4)+4,650(P/F,10%,5)=$4,703.93 Key information: Depreciation is accounting tool to account for use of capital equipment. It is an important part of cost of goods sold, therefore a part of income statement, but not a real cash flow that is paid for the year. Note, in this case, the equipment is assumed to be paid at once with cash. Contribution margin = Revenue - Variable Cost We can use this to separate the fixed cost (annuity) and variable cost. In this case, there is an annuity portion in the contribution margin. In the next cash flow, the Annuity portion from year 1 to 4 will be $6,250, and the gradient series will be $1600. Year 5 is unique and will be treated separately. Part 2. A year after the company accepted the project, the actual operation for year 1 is given below. How did the company perform? Working with Flexible Budget To develop flexible budget, we will use the actual volume information (800) and the projected cost information in Table 2 - Cost Estimation at Project Initiation. For example, the direct material was estimated to be $0.5 per unit. The Direct Material cost for 800 units will be $400(8000.5). Variance between Flexible and Budgeted is (Flexible - Budgeted). This is the influence due to the volume change. Variance between Actual and Flexible is (Actual - Flexible). This provided the influence of operation changes