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. 1. A website for Lawn Care: As the fourth year of operations came to a conclusion, Lawn Care considered building a website to attract more customers. The website was estimated to cost $5,000 per year to build, maintain and host. No additional costs were expected Questions: 1. What is the minimum number of new customers Lawn Care should expect to gain from the website in order to make it a profitable expenditure? Assume that the price and cost information for year 5 will be the same as year 4, which are in the HW2 solution (attached) Additional mowers (laborers) are available at the same wages. The existing mowing equipment is sufficient to support 100% more customers without additional investment. In thinking about "new customers," assume new customers will come in the same "mix" as existing customers: 50% small, 33% medium and 17% large There is no such thing as "half a customer." As a general rule, if your answer is a non-integral number of customers, round up to the next whole customer. Show your calculation of (0) the contribution per customer (price/average revenue, variable cost and contribution), (1) the fixed costs, and (iii) the breakeven number of customers. . 2. If only "small" customers were expected, what is minimum number of small customers that would be necessary to make it a profitable expenditure, Again, show your calculations. 3 15 new small customers are added in year 5, what will be the year 5 income statement? (Assume that the only change from year 4 is the new website and the additional customers that are serviced at the price and variable costs in year 4). If all of the new customers can be attributed to the website, was it a good investment? In a sentence, why? Lawn Care Income Statement. Inde first Year January 1 Year 1 December 31, Year 1 Year 1 January 1, Year 2- December 31, Year 2 Year 2 January 1, Year 4 December 31, Year Years Year 2 Revenu 5 18.400 000 January 1, Year 3- December 31, Year) Year increase prices New price 5 AD 10 5.00 5 15,120 $ 15,120 5 10,000 40,120 15 w 2014 10 w $ 43 cutiv Slowne 546/cut scutul $ 5 14,400 14,400 9,000 5 0.00% $15.120 315120 $ 10,080 Cort of Goods sold 5 21. 5 23.040 5 23040 5 7100 Labore 510/ 1.20 m/en" 1.920 18,200 MO 19,200 140 $ $ 19.200 $ 1140 3 15.00 3 ISMO 5 17,280 3 17,200 General and Administrative persen $ 4,100 $ 400 $ 4,100 $ 4,00 5 $ $ Martting/ Administration 2010 upplies and Maintenance EBITDA (earnings before interest, ones and depreciation 1,000 1.000 200 1.000 1.000 300 1,000 1.000 100 5 $ 11,060 11,000 12.30 5 12.50 rest $ $ $ 50 125 3 175 5 225 Total Annual Depreciation Mowen 5500/ Shed $1.500/2 100 75 $ $ 100 75 200 75 Earnings Before Teres 10,885 5 10,885 5 12. NOS 5 12,655 Tanes 25.00% 3 2,721 $ 2.221 5 1201 5 Not Income After Tax $ 8,164 S 8.164 5 9604 5 9,421 Comparative Balance sheets, at the start of the land after the first yew station As of December 31 Year As of December 1 Year As of Dec 11, Year As of December Year 4 As of January 5.30) 5 2,647 11.40 Cash Seni Neces Inventory $0.00 50.00 SO DO 50.00 5 $ 105 5 5 505 5 3.156 100 50 $ 6,312 100 6,628 100 505 S 100 Curent A 50.00 $ 4419 5 20,591 5 20,8370 5 40.116 Investment Gros Book Vale Lawn Mowers Cross Book ValueLow Shed Cumulative Dey Mowen and Shed Nato we of investments Tablet $0.00 50.00 $0.00 s $ 5 $ $ 5 500 1,500 175 1,025 500 1,500 350 10 5 $ 5 $ 100 1.500 525 1,475 5 $ $ 5 1,000 1.500 100 1.700 $0.00 $ 50.00 $ 10264 22,241 $ 11,845 $ 41,006 tables and Owners City Accounts Payable Salaries able Current and Payable $0.00 $0.00 $0.00 60% 1014 60S 2014 GO 14 Current $0.00 $ $ 3,814 $ 2014 $ 3,814 Long Term Debt $ $ 5 5 500 Totatis $0.00 $ $ 1,814 15 3,814 3 4314 Common Stock Preferred Stock Retained Camine 2,100 2,100 $0.00 30.00 $0.00 5 $ $ 5 2.100 $ 2.100 $ $ $ 3,164 16 Total Owner's Guy 50.00 $ 10,264 5 1420 Totalbies and Owners Equity 5 23,031 $ 17.30) 30.00 S 10.264 TRUE 22,241 TRUE $ 11,145 TRUE 5 41,816 TRUE Statement of Changes in Cash Flow Year 1 Year 2 Year 3 Year 4 $ $ 8,164 175 (3,156) $ $ 9,604 175 (316) $ S 9,491 275 Net Income Depreciation (Incl/Dec in Accts Receivable (Incl/Dec in Inventory Inc/(Dec) in Accts Payable Inc/Dec) in Salaries Payable 8,164 175 (3,156) (100) $ $ $ $ $ $ $ $ $ 0 0 3,814 Total Cash Flow from Operations $ 5,083 $ 8,996 $ 9,463 $ 9,766 $ $ $ (2,000) $ $ (Inc) in Gross Long-term Investments Sale of Gross long-term Investments (incl/Dec in Short-term Investments (500) Total Cash Flow from Investments $ (2,000) $ $ $ (500) Inc/(Dec) Short-term Financing Inc/(Dec) Long-term Financing Inc/(Dec) Equity Investment (Dividends and Distributions paid to owners) $ $ $ S S 500 2,100 $ 2,100 $ S 500 Total Cash Flow from Financing Total Annual Cash Flow Cash Balance at Beginning of Year Cash Balance at End of Year Check 5,183 $ $ $ $ $ $ 8,996 5,183 14,179 TRUE $ $ $ 9,463 14,179 23,642 TRUE $ $ $ 5,183 TRUE 9,766 23,642 33,408 TRUE Two clarifications arising from reciation today, both related to problem 1, the Lawn Care website: 1. Assume the website is turned on and the new customers start on January 1. (I know, it's unrealistic that a website gets turned on and the new customers show up instantly, but the assumption simplifies the math.) 2. In part 1, the number of new customers must be an integral number of small, medium and large customers in the original distribution (15/10/5)

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