During this period there will be manufacturing, and sales. The

A startup problem

You have been asked to evaluate the plan for a new start up.

The company is called Grumbudumbu and will manufacture a new type of sneakers. They will be made of a new extremely resistant and lightweight material. In addition, they will have an amazingly attractive design (Italian, of course).

Your assignment is to analyze whether, given the information available, this is a good business opportunity. Your client is a large investment fund, which has specialized in financing startups, and has been very successful doing so.

In order to do this analysis, you will divide the projected future of the company into 4 different and distinct time periods, each of them lasting a different number of years.

Phase 1 (2018 through 2021): This is the investment only phase of the project, and it lasts for 4 years. During each of these years the company will invest $2 million. There will be no production during this period.

Phase 2 (2022 through 2025): This phase will also last 4 years. During this period there will be manufacturing, and sales. The manufacturing process will be determined by the best possible use of technology, and the sales conditions will be determined by the company’s effort to maximize profits year-by-year.

The company’s technical consultants have determined that the technology to be used during this period may be summarized by the following monthly production function:

#period #manufacturing #sales

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