Problem:
Case Study: IVEY 910B13 Cool Moose Creamery
The question is related to the feasibility of a new venture that you are considering (first read the attached case, Cool Moose Creamery, for background details).
You recently met Greig Pernatinos and he has offered you the chance to purchase a franchise for a Cool Moose Creamery that you would set up in your home town. Although the financial details of the franchise arrangement have not yet been finalised, your discussions to date have focused on a combination of two costs, a flat fee up front, plus a percentage on product purchases that you make. You are particularly interested in the idea because you have spent a total of $10,000 of your own money over the last two years developing a new frozen snack (which you have called Snofroze) which you have patented and could make and sell in the ice cream parlour. Three of your best friends are willing to each invest $10,000 each in cash, and you have all agreed to take a quarter of the new business each in return for the $30,000 cash and the Snofroze formula and selling rights. The company will need to buy fixtures and fittings for the shop, as well as the ice cream machinery, and therefore it will need to approach a bank for a loan of $20,000 which you would expect to pay back over 2-3 years. You are now considering what information you will need to include in the financial assessment part of the Business Plan you will prepare for the bank.
For this assignment you are required to:
1. Write a brief analysis of the information that you will need to include in the financial assessment, explaining its significance. You should not include any quantitative data, but rather describe what elements need to be considered, what data you would include and how you would develop them, stating clearly your assumptions.
2. Assess the possible purchase of a new single-head soft-serve ice cream machine for your restaurant, using the same assumptions as on pages 3 and 4 of the Cool Moose Creamery case:
- list the qualitative issues that you need to consider;
- calculate the return on investment and payback period for purchasing a single-head machine (assuming that return equals the annual cash flow resulting from the machine and that the total investment equals the machinery cost plus any incremental investments / expenditures required to install it)
Summary
This question basically belongs to Finance as well as it is Ivey Case study Cool Moose Creamery. Financial assessment of Cool Moose Creamery as well as the possible purchase of ice cream machine and computation of return on investment as well as payback period for purchasing the machine.