In light of your discussion in the previous question what do you think about Tad's expansion plans?
Sunset would be entering a uncertain new market with new competitive dynamic relationship with competitors. Based on the cash flow statements, significant external funding would be required regardless of the decision to change the dividend payout ratio. At this early stage of the company’s history, expansion (in terms of a new location) might well be delayed for new location. With respect to the idea of wholesaling his boards to other vendors, there are several considerations. First, he would have to reduce his profit margin on each board distributed through this channel. Therefore, he will be trading off margin for additional volume. We do not have sufficient information to determine the impact of such changes. Further, there is a question as to whether or not Sunset can produce the additional boards required to enter the wholesale market without the addition of significant amount of fixed assets since additional assets were required in the second year of operations to sustain current sales volume. So without additional information, I would be hesitant to support this idea. There are additional considerations. Sunset has established a brand name and apparently, consumers are willing to pay the asking price for such. By wholesaling the boards to others, this exclusive product will become one of many available in surfboard shops – thus diluting the value of the brand.