South Delaware Coors Case

1046 WordsOct 31, 20135 Pages
The Problem(s). Manson and Associates was doing a research to determine market potential of a Coors beer distributorship for a two-county area in southern Delaware on behalf of Larry Brownlow so Larry could find the answer for the following question: • Does the South Delaware Coors distributorship offer sufficient investment potential given Mr. Brownlow’s current business and personal situation? Recommendation (s). After doing extensive research, we recommend Larry to pursue the Coors distributorship in southern Delaware. The total investment for the distributorship was estimated to be $800,000. Larry had enough funding to pursue this opportunity by investing $400,000 from his trust fund and made a loan from the bank in the amount of…show more content…
The fixed cost is assumed that Larry has discovered the other fixed cost incurred. The total investment is $800,000. The worst case scenario assumes that Larry got a total line of credit from the bank in the amount of $400,000 and invested $400,000 from other source. The Notes payable – short term and the long-term debt is (11.8 + 3.7) = 15.5 % from Table F in the handout. The Loan interest and payment per year is ($400,000 * 0.155)= $62,000. The Income data from Table F indicates that there is a 0.4% of all other expenses net out of the total sales which equals to $109,908 (5,700,666 gallons * $4.82 *0.4%) . TABLE 5. BREAK EVEN ANALYSIS (Best Case Scenario) Break even volume = $374,708 / ($4.82 - $3.72) = 340,643 gallons = 340,644 gallons Break even in dollar sales= $4.82 * 340,644 = $1,095,455.86 = $1,641,904 Break even in market share = Break even volume/Market Served size 340,644 gallons / (5,700,666 gallons * 0.089) = 340,644 gallons / 507,359 =0.6714 = 67.14% TABLE 5.1. BREAK EVEN ANALYSIS (Worst Case Scenario) Break even volume = $ 421,908 / ($4.63 - $3.87) = 555,142 gallons Break even in dollar sales= $4.63 * 555,142 = $ = $2,570,307 Break even in market share = 555,142 gallons / (507,359) = 1.09 = 109% In the worst case scenario, we assume there is a 5% fluctuation in unit sale price and unit variable

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