Assume that you have just been hired as a financial consultant to a startup company that plans to introduce a new beverage to the soft drink market. Your company’s product is advertised as a healthier alternative to soda and other artificially flavored drinks. The all-natural sparkling beverage has only 25 calories, 5 grams of sugar, no chemicals or preservatives, and comes in four fruit flavors: orange, pineapple, apple and grape.
Two years ago the product was introduced in Florida. A phenomenal growth in sales since its introduction demonstrates that the product and its marketing possess tremendous potential. Accordingly, the company wants to explore possibly expanding sales of the product to the rest of the U.S. market.
Although the company has been highly profitable, the management group has little to no financial experience. Most decisions to date have been made on the basis of ‘does it feel right’ as opposed to rigorous, data based financial analysis. The company has no system of financial oversight and the managers of the company have a limited understanding of sound management accounting practices.
You have been asked to provide the company with a general analysis of this proposed project. Your specific task is to produce a report discussing the following key aspects of this expansion project:
Based on the quality of your report, the management group will decide whether or not to hire you to then help them develop a full capital budgeting plan for this project. Because this is something you would like to do, mainly because capital budgeting consulting pays extremely well, you want to make sure your report is well written, organized, professional and convincing.
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