Jonathan and Emily Berry grew up watching their grandmother make the best chocolates at Christmas using an old family recipe. They had a vision that they could mass-market these chocolates, expecting them to be especially popular during Easter and the holiday season. They created a new company, Delicious Chocolates Inc., and the next step was to secure funding. Before approaching their bank, they have asked you to determine the feasibility of their new venture. They would like to you to prepare a report that considers both quantitative and qualitative analysis. In the report they would like to see a break-even analysis and any other analysis you deem important to aid in their decision to proceed to the next step, which is to secure start-up funding. The qualitative analysis should include a discussion of risks and opportunities of the new venture. The Berrys have provided the following information:

Appendix A

1. It is estimated that the worldwide consumer market for chocolate is $200 million annually.

2. Delicious Chocolates Inc. believes it has a premium chocolate recipe and market research conducted on their behalf has suggested that they could obtain between 0.5% and 2% of the worldwide chocolate market. The market research also indicated that Delicious Chocolate could expect the following probabilities of worldwide market share:

a. 0.5% of worldwide market share @ a 15% probability

b. 1% of worldwide market share @ a 60% probability

c. 2% of worldwide market share @ a 25% probability

3. Delicious plans to sell each box of chocolates at $20.00 to retailers.

4. Direct materials are expected to be $4 per box and direct labour $2 per box. The packaging of the chocolates is expected to cost $3.00 per box.

5. Delicious Chocolates will incur fixed expenses of $1,000,000 annually. This includes rent for a warehouse and a fixed distribution fee to retailers.

6. Delicious Chocolates will not be tax exempt. It has a tax rate of 30% of pre-tax profit. Delicious Chocolates has an after-tax target profit of $200,000