Canaan Group Financial Analysis - Base Case

Assuming: 50 weeks/year Phase 1 Phase 2 Phase 3 Notes

** Note that these volume numbers are just estimated forecasts - you may consider
playing with these values as well to see how your negotiated terms hold up under
Volume (per week) 200 400 1200 other demand scenarios.
Volume (per year) 10000 20000 60000
Market share (forestry) 2.04% 4.08% 12.24%

Annual overhead costs ($75,000 per month) $ 900,000 $ 900,000 $ 900,000

** This starting point was mentioned in the case, but these numbers still need to be
Base lease cost ($5000 per month) $ 60,000 $ 60,000 $ 60,000 negotiated and agreed upon with Joseph at Cache Creek
Total annual overhead costs (per year) $ 960,000 $ 960,000 $ 960,000
Total overhead costs per container $ 96 $ 48 $ 16

Revenue per container $ 1,825 $ 1,825 $ 1,825

** This variable cost will change based on negotiated freight rate with CP Rail. Note
that the freight rate for the pilot was $900/container due to low volume but Patrick is
Freight rate per container for CP delivery to dock
hoping CP rail will be willing to accept $400/container once volume increases (see
Exhibit 5).
$ 400 $ 400 $ 400
Total Variable costs per container (Exhibit 5) $ 1,725 $ 1,725 $ 1,725
Contribution per container $ 100 $ 100 $ 100
Total contribution per week $ 20,000 $ 40,000 $ 120,000
Total contribution per year $ 1,000,000 $ 2,000,000 $ 6,000,000
Profit per container $ 4 $ 52 $ 84
Profit per year $ 40,000 $ 1,040,000 $ 5,040,000
Steady State Breakeven
(# containers per week) 192

Initial Capital Costs $ 200,000

Payback for Capital Costs (# containers) 50,000
Number of Weeks Payback 250

** These values will change based on the negotiations with oseph at Cache Creek.
How these royalties are calculated (e.g., based on % of profit, % of container revenue,
fixed cost, etc.) should be part of the negotiations -- and something you will need to
Royalty payment to Cache Creek (annual) $0 $0 $0 add to the spreadsheet.

OVERALL ANNUAL IMPACT

Canann Group's Annual Profit accounting for royalty
payment $ 40,000 $ 1,040,000 $ 5,040,000

Cache Creek's Annual Revenue (lease plus royalties) $ 60,000 $ 60,000 $ 60,000

CP Rail's Revenue (delivery from Cache Creek to port) $ 4,000,000 $ 8,000,000 $ 24,000,000