The company operates a successful printing business that produces advertising flyers and catalogues. Dart Ltd. has retained earnings of $1.5 million and earned profits of $600,000 in the previous year.

David Silver is the editor of a local newspaper and earns a substantial salary. For years, he has envisioned publishing a high-quality magazine that would capture the interests of western Canadians. Silver has had many discussions with Heather Dart, and they have decided to develop and publish People West. Silver will quit his job and work full time on the new venture, for which he will be paid a good salary. Heather Dart will not work for the venture but will provide production advice, especially in the start-up phase.

The new venture will require owners’ capital of $600,000. As the venture will be shared on a 50/50 basis, both parties must provide $300,000 at the outset. This is not a problem for Heather Dart, as she has decided that Dart Ltd. will provide her share of the capital and will be the owner of her portion. But obtaining the $300,000 is not so easy for Silver: he has personal savings of only $280,000 and will have to obtain a second mortgage on his house for the balance.

The venture will require, in addition to the owners’ capital, financing of $400,000, which a local bank has agreed to advance. A financial advisor has developed financial projections after discussions with David Silver. These are summarized in the following table:

Year ………………………….	Income (loss)
1 ………………………………..	$(200,000)
2 ………………………………..	(120,000)
3 ………………………………..	80,000
4 ………………………………..	250,000
5 ………………………………..	500,000

In addition, Heather Dart has asked that the financial advisor prepare a report outlining alternative organization structures for the venture.

Required:

As the financial advisor, prepare the report.