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Handcrafted Treasures and Beach-Inspired Art The artisans' workshop is a hub of creativity, churning out a diverse range of handcrafted items. From delicate seashell jewelry embellished with pearls to intricate sand dollar trinkets, each piece resonates with the essence of Engabao's serene coastline. Additionally, their vibrant beach-inspired paintings have found a niche among tourists looking to capture the beauty of the ocean on canvas. The Star Product: Seashell Wind Chimes Among their varied offerings, it is the seashell wind chimes that have proven to be the main source of income for Engabao Artisans \& Co. These enchanting creations evoke a sense of tranquility and wonder, capturing the hearts of the tourists in their visit to this coastal paradise. The Financial Dilemma: With the success of the Karibao resort project continuing to attract a steady stream of tourists, the demand for Engabao's seashell wind chimes has surged dramatically. Currently, the company is considering growth in their revenues only with this product. To capitalize on this rising demand and achieve sustainable growth, the company faces two critical financial questions: - What should be the optimal unit price for their seashell wind chimes OR variable cost per unit of this item, to ensure a net income ratio above 35% ? - How many units must they sell annually to surpass their break-even point? (Break even point- in units- formula= Total Fixed Costs / (Selling price per unit - Variable Cost per unit) Financial Projections and Analysis: To address the financial dilemma, Engabao Artisans \& Co. conducted an in-depth analysis of their financial projections. They meticulously considered both cost and revenue factors that contribute to their bottom line. Here are the numbers: Engabao Artisans \& Co: A Financial Projections Case Study Introduction: Engabao Artisans \& Co. is a flourishing artisanal enterprise located in Commune Puerto Engabao, within the limits of Cantn Playas, Guayas Province, Ecuador. The company emerged in January 1st,2022 in response to the flourishing tourism industry, driven by significant private investments in real estate and hotel projects in the community. Engabao Artisans \& Co. specializes in crafting exquisite, handcrafted items inspired by the beach, with a particular focus on their best-selling product - seashell wind chimes. Background: Over the last eight years, the influx of tourists, primarily due to the nearby Karibao resort project, has brought immense economic benefits to the local community. Engabao Artisans \& Co. seized this opportune moment to showcase their artistic talents and cultural heritage through their crafts, creating a unique identity for their products. Engabao Artisans \& Co. considers a projection, for the following 6 years, that ALL THEIR OPERATING EXPENSES (fixed costs), will increase by 5% every year, compared to their immediate previous year. Interest expenses, Depreciation, and R\&D expenses remain the same EVERY YEAR TO COME starting 2024, and tax rate, according to the data presented in Table 1. Financial Projections and Recommendations: After comprehensive financial modeling and sensitivity analysis, Engabao Artisans \& Co. has formulated the following recommendations: - Optimal Unit Price: To achieve a net income ratio above 35\%, the company should consider increasing the unit price of their seashell wind chimes/ or decrease variable cost per unit. A moderate increase will not only reflect the true value of their artistry but also enhance their profitability. Still, the company knows that tourists do not buy the item if the price exceeds $41 per item. - Sales Target: To surpass their break-even point and ensure sustainability, the company must aim to sell a minimum of units annually. This target aligns with the current market demand and their capacity for production. TO SOLVE: Considering the info in the sections Financial Projections and Analysis \& Financial Projections and Recommendations, calculate for every year starting 2023 until 2028: - Using Sensitivity analysis or Scenario Analysis, what should be the optimal unit price for their seashell wind chimes OR variable cost per unit of this item (analyze and decide which of the two must be changed, or maybe both) to ensure a net income ratio above 35% ? Can it be sustainable for the whole 6-year period. Analyze and comment your findings. - For 2022 to 2028, per year: How many units must they sold annually to surpass their break-even point? - Use the provided Income statement projection worksheet to work on this analysis. Consider analyzing sensitivity analysis per year, saving per tab each analysis, to avoid putting all the analysis in a single tab of the worksheet. TO USE FOR CALCULATIONS: *(Break even point- in units- formula= Total Fixed Costs / (Selling price per unit - Variable Cost per unit) *NET INCOME RATIO: NET INCOME PER YEAR / TOTAL REVENUES PER YEAR *HINT: Begin calculating Net income on Income statement projection worksheet, using current and projected values on expenses (TABLE 1) and assuming 2022 values on TABLE 2 are the same for the 6-year period projected, to work on sensitivity analysis for Net Income Ratio. Handcrafted Treasures and Beach-Inspired Art The artisans' workshop is a hub of creativity, churning out a diverse range of handcrafted items. From delicate seashell jewelry embellished with pearls to intricate sand dollar trinkets, each piece resonates with the essence of Engabao's serene coastline. Additionally, their vibrant beach-inspired paintings have found a niche among tourists looking to capture the beauty of the ocean on canvas. The Star Product: Seashell Wind Chimes Among their varied offerings, it is the seashell wind chimes that have proven to be the main source of income for Engabao Artisans \& Co. These enchanting creations evoke a sense of tranquility and wonder, capturing the hearts of the tourists in their visit to this coastal paradise. The Financial Dilemma: With the success of the Karibao resort project continuing to attract a steady stream of tourists, the demand for Engabao's seashell wind chimes has surged dramatically. Currently, the company is considering growth in their revenues only with this product. To capitalize on this rising demand and achieve sustainable growth, the company faces two critical financial questions: - What should be the optimal unit price for their seashell wind chimes OR variable cost per unit of this item, to ensure a net income ratio above 35% ? - How many units must they sell annually to surpass their break-even point? (Break even point- in units- formula= Total Fixed Costs / (Selling price per unit - Variable Cost per unit) Financial Projections and Analysis: To address the financial dilemma, Engabao Artisans \& Co. conducted an in-depth analysis of their financial projections. They meticulously considered both cost and revenue factors that contribute to their bottom line. Here are the numbers: Engabao Artisans \& Co: A Financial Projections Case Study Introduction: Engabao Artisans \& Co. is a flourishing artisanal enterprise located in Commune Puerto Engabao, within the limits of Cantn Playas, Guayas Province, Ecuador. The company emerged in January 1st,2022 in response to the flourishing tourism industry, driven by significant private investments in real estate and hotel projects in the community. Engabao Artisans \& Co. specializes in crafting exquisite, handcrafted items inspired by the beach, with a particular focus on their best-selling product - seashell wind chimes. Background: Over the last eight years, the influx of tourists, primarily due to the nearby Karibao resort project, has brought immense economic benefits to the local community. Engabao Artisans \& Co. seized this opportune moment to showcase their artistic talents and cultural heritage through their crafts, creating a unique identity for their products. Engabao Artisans \& Co. considers a projection, for the following 6 years, that ALL THEIR OPERATING EXPENSES (fixed costs), will increase by 5% every year, compared to their immediate previous year. Interest expenses, Depreciation, and R\&D expenses remain the same EVERY YEAR TO COME starting 2024, and tax rate, according to the data presented in Table 1. Financial Projections and Recommendations: After comprehensive financial modeling and sensitivity analysis, Engabao Artisans \& Co. has formulated the following recommendations: - Optimal Unit Price: To achieve a net income ratio above 35\%, the company should consider increasing the unit price of their seashell wind chimes/ or decrease variable cost per unit. A moderate increase will not only reflect the true value of their artistry but also enhance their profitability. Still, the company knows that tourists do not buy the item if the price exceeds $41 per item. - Sales Target: To surpass their break-even point and ensure sustainability, the company must aim to sell a minimum of units annually. This target aligns with the current market demand and their capacity for production. TO SOLVE: Considering the info in the sections Financial Projections and Analysis \& Financial Projections and Recommendations, calculate for every year starting 2023 until 2028: - Using Sensitivity analysis or Scenario Analysis, what should be the optimal unit price for their seashell wind chimes OR variable cost per unit of this item (analyze and decide which of the two must be changed, or maybe both) to ensure a net income ratio above 35% ? Can it be sustainable for the whole 6-year period. Analyze and comment your findings. - For 2022 to 2028, per year: How many units must they sold annually to surpass their break-even point? - Use the provided Income statement projection worksheet to work on this analysis. Consider analyzing sensitivity analysis per year, saving per tab each analysis, to avoid putting all the analysis in a single tab of the worksheet. TO USE FOR CALCULATIONS: *(Break even point- in units- formula= Total Fixed Costs / (Selling price per unit - Variable Cost per unit) *NET INCOME RATIO: NET INCOME PER YEAR / TOTAL REVENUES PER YEAR *HINT: Begin calculating Net income on Income statement projection worksheet, using current and projected values on expenses (TABLE 1) and assuming 2022 values on TABLE 2 are the same for the 6-year period projected, to work on sensitivity analysis for Net Income Ratio