1. Using data in the case, estimate market and sales potential in the projected market area. There are at least two ways to estimate market and sales potential from data in the attached studies. Be sure and review the KP chapter preceding the case to understand the distinction between market potential and sales potential. This question helps you focus on addressing one key component associated with determining the profit potential of an investment i.e. the revenue generating potential of the investment. I suggest computing the market and sales potential in both gallons of beer sold and in dollar sales.

2. Estimate the fixed and variable costs associated with setting up the distributorship. Building on the last question, you need to identify the probable costs associated with the investment. These costs are in two forms: fixed and variable. You may want to review the financial analysis chapter to review these prior to tackling this case. Note that Mr. Brownlow has estimated some relevant fixed and investment costs for you. However, has he covered them all? You should be able to use one or more of the studies to help him out here. Estimating variable costs are relatively easy in this case. Mr. Brownlow is establishing a wholesale business. Therefore he will be buying his beer from Coors and then reselling to local area retailers. The relevant variable cost is simply the cost of the beer from Coors. The next question and Exhibit 1 below help you with identifying this cost (on a per gallon basis).