Cost and Mountain Man Light

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Financial Projections
Year Revenues from MM beer 2006 $49,431,200 2007 2008 2009 2010 $48,442,576 $47,473,724 $46,524,250 $45,593,765 Assumptions- no price changes 2% Decrease in Market Size and no light product- Gross Margin remains the same

Contribution Loss of Contribution

15,323,672 766,184

15,017,199 750,860

14,716,855 735,843

14,422,517 721,126

14,134,067 706,703

5% Loss due to light beer entry .05 * Contribution

Launch advertising costs Incremental SG&A expenditures Incremental costs associated with Light Product E.C. Light Market Assumed Market for ligth beer (b/s) *1 Market share for Mountain Man Light Barrels sold Mountain Man Light Contribution of Light Product *2 Net change in contribution *3 Discount factor Present value 5 Year NPV

750,000 900,000 $2,416,184

0 900,000 $1,650,860

0 900,000 $1,635,843

0 900,000 $1,621,126

0 900,000 $1,606,703

19,494,075 0.25% 48,735 $1,236,899 - $1,179,285 1.12 -$1,052,933 $7,074,633

20,273,838 0.50% 101,369 $2,572,750 $921,890 1.25 $734,925

21,084,792 0.75% 158,136 $4,013,490 $2,377,647 1.40 $1,692,362

21,928,183 1.00% 219,282 $5,565,373 $3,944,247 1.57 $2,506,640

22,805,311 1.25% 285,066 $7,234,985 $5,628,281 1.76 $3,193,638

4% Market Growth rate .25%

12%

*1. Ex. 5 Light Beer (2005) 18,744,303 barrels * 1.04 = 19,494,075 barrels *2. 19,494,075 * .0025 = 48,735 * 25.38 = 1,236,899 *3. $2,416,184 - $1,236,899 = -$1,179,285 (negative contribution)

Breakeven Analysis MMBC revenue in 2005 MMBC barrel production in 2005 Revenue per barrel Variable cost per barrel Projected reduction in MMBC revenues from shrinking market Projected loss of Mountain Man Lager sales from Mountain Man Light launch Projected loss of contribution → $50,440,000 * .96 = $48,422,400 * .31 = $15,010,944 * .05 = $750,547 Higher variable cost of light beer Contribution per barrel of Mountain Man Lager Contribution per barrel of Mountain Man Light # Barrels needed to recover Loss in...
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