Rhiannon is wondering if she should also pay the helper a sales commission of $1 per ring sold. This would allow Rhiannon to focus more on production. In addition to producing 1,500 rings a year by herself, Rhiannon is wondering if she can gather and prepare stones for cheaper. Assuming 100 stones per month, she estimates the added fuel expense for this approach would total $150 per month (Rhiannon isnt sure if other vehicle costs like insurance should be included). Materials to prepare the stones for mounting would total $100 a month. Rhiannon is wondering if she should consider other factors like time spent- she expects to spend 6 hours a month gathering, cleaning, and coating stones. She is wondering about potential pros and cons of producing her own stones, outside of projected cash flows.

Rhiannon has been offered the chance to buy a 50% share in the stone preparing business she buys from for $300,000. Rhiannon has inquired about borrowing the sum from the bank and has been quoted a 6% annual rate. She expects the business to maintain its $100,000 annual profit level for the next ten years. Rhiannon also wants to repay the loan within ten years, so she feels like this is an appropriate investment evaluation horizon. She is wondering what some appropriate methods of evaluating this investment opportunity might be. In addition to learning about how you would evaluate the investment and why, she wants to know about other relevant factors which should be considered.

Analyze Rhiannons business and advise her on the matters raised in the case. Make sure your recommendations are well supported by quantitative and qualitative analysis which ties to the case facts.