Based in Winnipeg, Manitoba, Clearview Security Technologies Inc. (Clearview) was founded to provide security systems, facilities controls, and related services. Clearview established a solid reputation for quality and the business grew, thanks to strong relationships with large long-term customers in Canada and the United States. Clearview has experienced little competitive pressure in its core market and the company's offerings are standardized, enabled by significant technological and financial barriers to entry.
The Research and Innovation Group (RIG) is the development side of the company. Where Clearview's primary lines are standardized, the RIG is all over the map. Clearview uses this smaller division to provide contract software and consulting to a wide range of business types.
The RIG is considering a new contract that will strain resources for not only the RIG, but the entire company. The project involves new technology, a new customer, and a new geographic area. The director of operations has warned you that it will be substantially more risky than anything Clearview does in its core business. With an upfront cost of C$8.5 million, managers want to develop an understanding of expected financing costs. The director of finance explained that understanding cost of capital will be a key part of maintaining and improving Clearview's competitive edge. RIG managers have noticed competing bids for the contract and it is expected that margins will be pushed down.