On May $5,2016,$ Rosetta Kilbourne, owner of Sugar and Spice Bakery $($Sugar and Spice$),$ was planning for her business's future. The lease on Kilbourne's bakery, located in Strathroy, Ontario, Canada, would expire at the end of August. Operating the bakery had become expensive, and Kilbourne wondered if it would be financially feasible to close the bakery and focus on catering events full time.

STRATHROY$-$CARADOC: Strathroy was located $40$ kilometres west of a major southwestern city, London $($population $367,000),$ and was the largest community within Middlesex County outside of London.$\text{'}$ The town of Strathroy and the township of Caradoc amalgamated in $2001$ to form the municipality of Strathroy$-$Caradoc $($Strathroy$).$ Of its $20,000$ residents, $12,000$ lived in the urban centre. Strathroy supported urban and rural areas with a range of businesses and industries, including agri$-$business, manufacturing, and logistical operations. With direct access to rail and trucking routes to the rest of southwestern Ontario and approximately $71$ kilometres to the U$.$S$.$ border, businesses had easy access to regional and international markets.? Strathroy was home to Cuddy Farms, a global leader in producing and delivering commercial turkey eggs and poults.? Each June, the town hosted Turkey Fest, a weekend event including a midway, carnival games, a turkey$-$calling contest, a battle of the bands, an antique car show, and a poult petting zoo. A popular event for the residents of Strathroy, the festival also attracted visitors from London and other towns within middlesex county.

Rosetta Kilbourne: had always had a passion for baking. From a young age, she had created her own recipes, which her family thoroughly enjoyed taste testing. Her dream had always been to open a bakery of her own, but she feared financial instability and the risks of becoming self$-$employed. After graduating from college, Kilbourne accepted what she thought was a secure position working as an administrative assistant for a security company based in London, Ontario. During the spring of $2007,$ Kilbourne was laid off. The Purchase While Kilbourne contemplated her next steps, a small bakery, Sugar and Spice, was for sale in her hometown of Strathroy. The bakery served classic desserts, soups, and sandwiches and was open Monday to Friday from $7$ a$.$m$.$ to $4$ p$.$m$.$ Kilbourne decided she had put her dream on hold for long enough; with financial help from her father, Kilbourne purchased the bakery and opened in September $2007$ as a sole proprietorship. The bakery was well known and had a good reputation within Strathroy, so Kilbourne kept its existing name and hours of operation, but altered the menu to include a wider variety of lunch and dessert options. Kilbourne also continued to employ the bakery's existing full$-$time employees. Customers: Sugar and Spice was a popular morning destination for local retirees of the Strathroy community. Several regular groups of customers would arrive together for their morning coffee and a pastry. These customers typically would visit with each other at the bakery for approximately an hour and a half. On average, the retirees spent less than $$54$ per visit. Kilbourne knew all of their names and regular orders a personal touch that she believed kept the retirees coming to the bakery.

Aside from the retirees, the bakery rarely had customers who stayed to consume their purchases. Sugar and Spice's main revenue came from take$-$out orders, made either in person or over the phone. It was common for phone orders to be received early in the morning for pick$-$up during the lunchtime rush between $11$ a$.$m$.$ and $1$ p$.$m$.$ These phone orders were primarily large orders over $$150$ from local businesses or community groups. Sugar and Spice did not offer delivery.

Operations : Kilbourne had two full$-$time employees who were paid $$12\mathrm{.}50$ an hour and two part$-$time employees who were paid $$11\mathrm{.}25$ an hour. Both full$-$time employees worked from $6$ a$.$m$.$ to $2$:$30$ p$.$m$.\text{'}$ each weekday, and one of the two part$-$time employees worked from $2$ p$.$m$.$ to $5$ p$.$m$.$ each weekday. During the morning and lunchtime rushes, Kilbourne desperatelyPerform a business size$-$up of Sugar and Spice Bakery by completing the following:

$1.$ Analyze the expansion opportunities of closing the storefront to cater events from a qualitative strategic perspective.

$2.$ Using the excel template file, identify which of the cash flows associated with the opportunity are relevant. If the cash flow item is relevant, identify if the item is recurring or a one$-$time cash flow. $($Questions $3$ and $4$ next page$)$

$3.$ Prepare a $1$ year differential analysis for both the low and high sales projections to determine return on investment for closing the store. $($Hint: if the cash flow item is relevant and recurring, it should be included in your analysis to determine incremental net cash flow. ROI would be your incremental net cash flow divided by your total of one$-$time cash flow items.$)$

$4.$ Would you recommend to close the store? Explain.