WiseElect, a dynamic and innovative small-scale home appliance manufacturing company based in Vancouver, Canada, has experienced remarkable success in the domestic market. Renowned for its cutting-edge designs, energy efficiency, and integration of artificial intelligence technology, WiseElect is now set to embark on an expansion into new markets. The companys CEO, Peter Gallagher, has identified an opportunity to expand into the thriving Israeli market. However, this expansion requires additional funds that the company will need to raise through either debt or equity financing. As the CFO of WiseElect, your role is to evaluate the various issues below, provide recommendations on the expansion and optimal financing approach, as well as address the ethical dilemma of sustainability in the expansion process.

WiseElect has captured the attention of consumers with its game-changing home appliances that combine functionality, style, and the power of artificial intelligence. These smart appliances incorporate advanced AI technology, enabling users to interact with their appliances through voice commands, smartphone apps, and intelligent automation. For instance, the company's AI-powered refrigerator uses computer vision to recognize and track food items, provide recipe suggestions, and optimize energy usage based on user preferences. Having experienced some recent blood pressure concerns, Peter is especially interested in using this functionality to help motivate him on his own journey towards living a healthier lifestyle and has recently launched a new marketing campaign using the slogan MotivAte Me. He is worried that the company is spending too much on marketing but believes this will pay off in the long run. The companys AI-enabled home appliances have attracted widespread acclaim for their ability to enhance convenience, energy efficiency, and user experience. With a focus on energy efficiency and sustainability, WiseElect has become a trusted brand among environmentally conscious consumers. WiseElect's most recent set of financial statements is included in AppendixA.

Financing:

To support the companys possible expansion and further investment in new technology, WiseElect will need additional funds. The company currently has a strong financial position, with healthy cash reserves and a positive operating cash flow. Furthermore, WiseElect has a good credit history and a favorable relationship with its existing lenders. There are currently two financing opportunities available to the company at this time, with the potential for additional financing at a later date. The CEO would like you to compare the two financing options and provide guidance on which one would be best for the company to pursue.

Option 1: WiseElect has approached an Israeli bank to secure a loan for the expansion to Israel, or for use in further technological investment. The bank has offered a term loan of $2 million with an interest rate of 8% per annum. This bank is known for offering strict debt covenants and requires the company to maintain a current ratio of 2.2:1 at each financial reporting date. The loan has a repayment period of five years, and WiseElect would need to make equal monthly payments, including principal and interest. The loan requires collateral in the form of the company manufacturing equipment, with a market value of $1.8 million.

Option 2: WiseElect has engaged with venture capitalists interested in investing in the company's expansion. They have proposed an equity financing deal where they will invest $2 million in exchange for a 20% ownership stake in WiseElect. The venture capitalists have a track record of supporting successful technology companies and can bring valuable industry expertise and networks to help accelerate WiseElect's growth.

APPENDIX A: WiseElectFinancial Statements

WiseElect

BALANCE SHEET

December 31, 2022

	2022	2021
ASSETS
Current Assets
Cash	$600,000	$500,000
Accounts Receivable	$400,000	$300,000
Inventory	$900,000	$700,000
Total Current Assets	$1,900,000	$1,500,000
Land & Buildings	$2,000,000	$2,000,000
Equipment	$1,800,000	$1,500,000
Intangible Assets	$200,000	$200,000
TOTAL ASSETS	$5,900,000	$5,200,000
LIABILITIES
Current Liabilities
Accounts Payable	$500,000	$400,000
Accrued Expenses	$150,000	$100,000
Unearned Revenue	$200,000	$200,000
Total Current Liabilities	$850,000	$700,000
Long-Term Debt	$700,000	$800,000
TOTAL LIABILITIES	$1,550,000	$1,500,000
SHAREHOLDERS EQUITY
Common Stock	$500,000	$500,000
Retained Earnings	$3,100,000	$2,700,000
Additional Paid-inCapital	$750,000	$500,000
Shareholders Equity	$4,350,000	$3,700,000

WiseElect

INCOME STATEMENT

For the period ending December31, 2022

	2022	2021
Revenue
Sales Revenue	$4,800,000	$3,700,000
Service Revenue	$200,000	$300,000
Total Revenue	$5,000,000	$4,000,000
Cost of GoodsSold	$2,800,000	$2,200,000
Gross Profit	$2,200,000	$1,800,000
Operating Expenses
Salaries &Wages	$700,000	$600,000
Rent & Utilities	$250,000	$200,000
Marketing Expenses	$400,000	$300,000
Other Operating Expenses	$150,000	$100,000
Total Operating Expenses	$1,500,000	$1,200,000
Operating Income	$700,000	$600,000
Interest Expense	$50,000	$60,000
Income Before Tax	$650,000	$540,000
Tax Expense	$195,000	$162,000
Net Income	$455,000	$378,000

State the issue

Conduct a Quantitative and Qualitaive analysis

State the recommendation