PET PROJECT EXPANSION \"Crazy\" Connor Cooper is a somewhat eccentric yet enthusiastic businessman who believes in the social responsibility of business. Incidentally, he is also interested in making enough money to live a comfortable life. As a supporter of the ecology movement, he is very concerned with the hunting of animals for industrial purposes, such as the making of furs. shoes, and ladies\" handbags. As a consequence, he formed Fleptile Factory Enterprise (FlFP), a company with a mission of promoting crocodiles as household pets. [The choice of the animal was purely coincidental} He plans to catch crocodiles in Southeast Asia and sell them in the United States.1 The senior leadership team of the company consists of Mr. Connor Cooper (President), Brian Chu {Vice President of Production, who is in charge of catching crocodiles), Marco Diaz ['rfice President of Sales}, and Shelley Maze [Vice President of Operations, who is in charge of administrative functions including cash collection from customers). Facilities Planning The first task facing Mr. Cooper was to raise capital. This required estimating future capital needs by projecting the physical facilities and working capital needed for the business. Mr. Cooper's estimates showed that he would need a fleet of boats to catch crocodiles in Southeast Asia and a holding tank in the State of Gould to keep them alive in captivity after they are shipped. Because of the need to extend liberal credit terms to skeptical customers, the company needed working capital to carry inventories and receivables. Finally, the company needed a large start up investment for sales and an advertising campaign. The firm also needed funds to hire new employees and to rent office space in the State of Gould. Mr. Cooper asked Shelley Maze to prepare a forecast of activity to plan facility needs and to translate it into capital needed to start the business. First Year Flesults Based on the forecast provided by Ms. Maze, Mr. Cooper and his ecology minded friends raised the capital for acquiring the facilities. He leased ten boats in Southeast Asia, a 2t},DDD square foot warehouse with a holding tank for the crocodiles in the State of Gould, and a 2,500 square foot office in the State of Gould. Both the warehouse and the office were leased from Clyde Property Management {CPMJ for three years, beginning January 1, EDGE. The company opened its door for business on January 1, 2003. Marco Diaz launched an aggressive sales and advertising campaign built around the slogan that crocodiles were warm, friendly and greatly misunderstood creatures that deserved loving care. He designed a slick marketing campaign built initially around the slogan: "Crocodiles -- don't handbag them, handle them with love." During its first year, the company spent approximately $3DD,UDD to catch Slit] crocodiles. Cf these, one crocodiles were sold and shipped to customers at a selling price of $1 ,UUD per crocodile. Shipping sums of $50 per crocodile were paid for during the year. Customers were given liberal credit terms and only $160,u{] from an equivalent coo customers was collected during the first year. Ms. Maze estimated that as much as 29% of the sales price will be spent in collection costs and bad debts expenses. At the end of the first year, Mr. Cooper consulted with his other two colleagues and estimated that he could catch and sell Slit) to BBC! crocodiles for the next year. Because of the company's apparent success, Mr. Cooper wanted to expand its facilities. This meant getting funds to rent more boats and warehouse space. He believed that he could now overcome the skepticism of banks and ask for a loan. On January 2, 20GB, Mr. Cooper notified Clyde Property Management that he no longer needed their current warehouse and office space. He would be vacating the properties by January 30th in order to move into larger facilities. 1 Assume that Mr. Cooper has somehow managed to obtain permits to sell live crocodiles legaily
