Appendix One (Construct or lease) Objective: Should FFT lease or construct their own production facility Option 1: Construct Costs to incur: Buying land, construct building and getting ready for use (FFT has these funds available in their bank account today so no mortgage is needed) $ 900,000 Taxes, insurance, and repairs (per year) $ 20,000 Intended years of use 15 Projected market value in 15 years $ 1,500,000 Option 2: Lease Intended years of use 15 Deposit required today (this deposit will be returned to FFT when the lease contract is complete is 15 years) $ 50,000 Annual lease payment $ 120,000 Property taxes (annual) to be paid by FFT $ 15,000 Insurance (annual) to be paid by FFT $ 25,000 Required rate of return 10% Methodology: The consulting team is proposing to perform a NPV analysis and determine the benefit to leasing or construction. Based on the analysis, they will recommend the preferred option (construction or leasing).

Appendix Four (Drop or Retain a Product Line) Objective: Determine whether to Drop or Retain a segment, early evening dinners. As part of this process, a Contribution Margin Income Statement needs to be prepared. Scenario: Using the Income Statement in Appendix One, prepare the Contribution Margin Income Statement, given the following information related to the companys expenses: Cost of Goods Sold is 2/3 variable and 1/3 fixed Operating Expenses are 50% variable and 50% fixed Administrative Expenses are $7,000 variable and $15,000 fixed Rent Expense is all fixed HINT: Please note that the operating profit that you calculate in your Contribution Margin Income Statement will be the same as the Profit Before Income Tax in the Income Statement provided in Appendix One (in other words, in the student template, the two fields that are shaded in yellow should be the same amount). The financials by segment are then provided in the student template. It is believed that if the segment of early evening dinners is dropped, that half of the fixed expenses of that segment would remain. As well, it is believed that if the segment of early evening dinners is dropped, sales of lunches would increase by 10%. Complete the template accordingly and determine whether this segment should be dropped