2/17/25, 12:37 PM TestReach

REPORT
To: Board of directors
From: Tranart consultants
Subject: New investment projects
Date: 4 March 2025
Introduction
This report advises on the financial and non-financial benefits and drawbacks of each of the two
investment projects (a new range of sailing dinghies versus a new range of luxury yachts) and
recommends, with reasons, which should be chosen.

SAILING DINGHIES

Less Investment

Sailing dinghies require lower initial investment of $4m when compared to that of luxury yachts.
The remaining surplus of $6m can be used to invest in future strategies of the company whcih
would contribute in your growth.

Payback period

The payback period of saleing dinghies is only 3.5 years whereas Luxury yachts' payback period is
almost double than this with 6 years. This implies that with sales dinghies, your company will be
able to recover the investment amount and generate profits quicker.

Competition

With sailing dinghies, the competition would be much lower and it would be easier to increase your
market share. All of the existing manufacturers, even though long established, are smaller than that
of Yexamarine and hence, it could be easier to gain competitive advantages over them, thus
attracting more customers.

Simple design

The design of sailing dinghies is relatively simple with fewer controls which would require lesser
use of [Link] might be beneficial for the company since they can generate revenues
without much investment in the technology area.

Lower NPV

The NPV of sailing dinghies is significantly lower than that of luxury yachts with the difference
amounting to about $1.5m.

Profit margins

Both the gross and operating profit margins are lower for sailing dinghies as compared to luxury
yachts. With your company focusing on increasing its profitability, investing in sailing dinghies might
not contribute to the objective.

[Link] 1/3
2/17/25, 12:37 PM TestReach

No experience

Yexamarine has expertise of over 50 years in the yacht manufacturing field. Sailing dinghies
however, is a type of boat. This implies that your company does not have any prior experience in
manufacturing boats and hence, this might impact the efficiency and ultimate quality of the final
product.

LUXURY YACHTS

NPV

The NPV of luxury yachts is higher with $7m as compared to that of the sailing dinghies.
Investment in this project would help in maximising shareholder value.

Profit margins

Over the next five years, Tony Bursham wants Yexmarine’s gross profit margin to increase from
40% to 45% and its operating profit margin to increase from 15% to 20%. Investment in luxury
yachts would enable your company to meet this strategic aim since it provides with a strong gross
profit margin of 62% and an operating profit margin of 28%.

Diversification and growth

Luxury yachts would enable your company to be able to compete with leading manufacturers at the
global level. This would give more reach to Yexamarine and help the company in attractig
customers from the foriegn market as well, ultimately leading to growth of your company.

Customer service

Customer service is something your company outperforms all the competitors in and has an
expertise in the same. Customers of luxury yachts pay a premium for the enhanced performance
and comfort. It is only normal that they would expect adequate customer services. Providing them
with the best customer services would help Yexamarine in retaining such customers, and could
also lead to repeat orders.

Expertise

Yexamarine has expertise in the yacht manufacturing industry and has been doing this since the
past 50 years. This expertise can be used in the manufacturing of these luxury yachts ultilmately
improving quality of the products.

Customisation

Yexamarine provides only limited additional features to its customers as compared to its
competitors. Luxury yachts are built on an individual basis and reflect the owner’s tastes. Your
company might have to work on building new additional features in order to satisfy premium
customers.

Global competitors

Yexamarine does not have prior experience of competing with large internaltional manufacturers.
The foriegn manufacturers, larger than your company might have more expertise in luxury yachts
providing customers with the best quality products. Yexamarine might not be able to absorb this
level of competition.

RECCOMENDATION

[Link] 2/3
2/17/25, 12:37 PM TestReach

Both options have their respective pros and cons. However, in my opinion, i recommend selecting
the LUXURY YACHTS.

For one, luxury yachts have a higher NPV than that of sailing dinghies. It would also give your
company the opportunity to expand into the global markets. It would also help Yexamarine in
increasing its gross profit and operating profit margins to 45% and 20% respectively.

Best regards
Tranart Consultants

[Link] 3/3