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Unsecured Debt Starlight Capital can lend up to 10,000,000. Although the loan does not require business assets as collateral, its covenantslimit WDI’s abilities to sell assets and transfer the control of shares. A variable interest is required annually when EBITDA is more than a certainamount, increasing the cost of financing.Loan CovenantsThe line of credit and the term loan with GBI Bank Inc. contain two covenants: Line of credit covenant – maintain EBIT to interest ratio at or above 1.8 EBIT to interest ratio is trending downward throughout the three-yearperiod between 2018 and 2020, indicating that less operating income isgenerated to cover the interest expense. WDI is narrowly meeting the covenant based on the draft balance sheet,with a ratio of 1.8. This declining ratio increases the likelihood of acovenant breach. Term loan covenant – maintain a debt-to-equity ratio at or below 3.5 The debt-to-equity ratio is trending upwards, and this may be the result ofshare issuance to Kingsley and the repayment of REC bank loan. The debt-to-equity ratio for 2020 is 2.8 and is within the covenant limit.However, it is greater than the benchmark of 2.6, indicating more relianceon debt than the industry standard.There are also two covenants attached to the unsecured debt from the Starlightproposal: No dividend payout while the debt is outstanding. WDI paid a 6 million dividend in 2018 but no dividend payout in the lasttwo years. This covenant restricts WDI’s ability to pay out an annual dividend toKingsley if Kingsley decides to purchase the cumulative preferred shares. Any asset or share sale will need to be approved by Starlight. This limits WDI’s ability to transfer the control of shares and eventuallyincreases the cost and complexity of the sale.External and Internal AnalysisSee Exhibit 3 for the SWOT Analysis; and Exhibit 4 for the PESTEL analysis.9 / 39

Analysis of Strategic OptionsWDI has 4 strategic options available to pursue:1)2)3)4)PPP Agreement for Organics FacilityStart a Consulting DivisionModify Recycling DivisionInvest in PristineOption #1: PPP Agreement for Organics FacilityWDI was approached by six local municipalities to enter into a Public-PrivatePartnership (PPP) agreement to open and operate an organic waste treatment facility.Qualitative AnalysisProsCons Will use the most advancedtechnology for the breakdown oforganic material. Fitting withWDI’s strategy of being a leaderin technology. There is still a large capitalinvestment required. Taking onadditional debt may be difficult forWDI to service as they alreadyhave little free cash flow. Provincial governments areencouraging residents to divertorganic waste from landfills. Thiswill allow WDI to stay ahead ofchanging regulations. Municipalities have a large amountof control over the contract,increasing risk the terms of thecontract may negatively change. Utilization of biogas for fuel willnot only reduce costs for WDI butalso be consistent with WDI’sgoal to improve environmentalsustainability. Should WDI ownership change,the organics contract will beterminated. This may deter futureinvestors from pursuing WDI. Can utilize existing fleet ofvehicles for collecting organics,reducing capital investmentrequired. Contract requires stringent qualityspecifications. WDI may facesignificant penalties if it cannotmeet the specifications.10 / 39

Quantitative AnalysisSee Exhibit 5ResultsUsing a discount rate of 10%, investing in the organics facility has a positive cash flowof 12.45M over the 30 years. However, the board’s objectives are not met as operatingcash flows will not increase by 1.7M until 2024.A 30-year timeframe was used as that is the duration of the contract.Strategic AlignmentWDI’s vision, mission, and core values seek to improve elements of technologicaladvancements, environmental sustainability, and customer service. Pursuing theorganics facility achieves this by using biogas as fuel to increase sustainability, buildingrelationships with new municipalities, and using a state-of-the-art facility.FinancingRequirements WDI will need to raise 12M for the purchase of equipment.Options Utilize Starlight Capital loan of 10M Kinsley can purchase more non-voting preferred sharesFinancial ReportingUnder ASPE 3056 the arrangement will be considered a jointly controlled operation: All assets, liabilities, and income from the operation must be recorded on WDI’sfinancial statements.Tax ImplicationsWDI must report expenses and income from the joint operation on its financialstatements. WDI will be allocated 50% of the before-tax income from the organicsfacility which is active business income and will be taxable.Option #2: Environmental Consulting ServicesThom Lancaster has approached Laura about the possibility of WDI adding anenvironmental consulting division to its operations.11 / 39

Qualitative AnalysisProsCons Opportunity to sell consulting, andinnovative services to new andexisting customers. This diversifiesWDI’s earning potential. Opportunity cost for WDI to losereferral fees from consultingengineering firms. Thisdecreases the profit margininitially. Having up-to-date knowledge inhouse will benefit other WDI’soperations to improve existingservices. Consulting business has higherlegal liability risk which couldresult in large contingentliabilities. Consulting services offer highermargins since it does not rely onnatural resources, such as fuel tooperate. Contracts are not long-term andstable; therefore, revenue andprofit levels will fluctuate and bedifficult to forecast and budget. Does not require any capitalinvestment. Allows WDI to allocatefunds towards other capitalinvestments. Free cash flows will not improveimmediately while the book ofbusiness takes time to build up.Quantitative AnalysisSee Exhibit 6Profitability AnalysisThis option meets WDI’s goals and objectives as the consulting services would improvethe operating profit margin above 9% by 2022. As net income increases, this would alsoincrease shareholder value.Strategic AlignmentThis option aligns with WDI’s current mission, vision, and core values by providing nicheremediation consulting to customers and advising companies on product end-of-lifedisposal responsibilities. There is also a growing market for environmental consulting12 / 39

services since there is increased attention to environmental protection laws.Additionally, having various types of services provided is a KSF for WDI.FinancingThis option does not require any upfront capital; therefore, WDI does not need to lookfor any financing alternative.Financial Reporting1) WDI recognizes revenue based on ASPE 3400. Performance will be met when service is recognized using the percentageof completion method. Measurement is reasonably assured. This is based on the ability toreliably estimate stages of completion. Collection is reasonably assured. This is important since the estimatedaverage accounts receivable collection period is 35 days.2) Contingent liabilities (ASPE 3290) should be reviewed for possible accrualentries.Tax ImplicationsRevenue recognized from the consulting services division will be considered as WDI’sactive business income. Consulting services’ revenue and expenses incurred will beincluded in WDI’s Corporate Income Tax Return (T2).Option #3: Modify Recycling DivisionWDI is considering three options for the recycling division:Option 1Temporarily shut down the recycling plants until selling prices for current productsrebounds.Option 2Continue to recycle materials with a positive contribution margin and sell any otherunprocessed recyclable materials.Option 3Continue recycling materials with a positive contribution margin, sell any otherunprocessed recyclable materials, and invest in aluminum or PET plastics.13 / 39

Qualitative AnalysisProsOption 1Option 2Option 3Cons Labour can be betterutilized than when sellingprices are low. This isconsistent with Jack’sobjective to reduce costs. If the price of recycledmaterials continues todecrease, the recyclingfacility will close indefinitely.This does not support WDI'smission to provide recyclingservices to customers. Does not require largecapital expenditure. This isin line with Brian’sobjective to invest whencash flows are available Will result in WDI earninglower than industry profit ascompetitors are able toprocess materials moreefficiently with technology Allows WDI to providePET or aluminumrecycling. This increasescustomer services bymeeting customers’changing demands Laura may approve ofupdating the recycling plantwhereas Jack may not. If keystakeholder preferences aremisaligned, disagreementsmay hurt board relationships. Will meet WDI’s corevalues of staying up todate with advancedtechnologies andpromoting sustainablepractices. Large financing requirementmay make WDI unable toinvest in the other strategicoptions.Quantitative AnalysisSee Exhibits 7, 8, and 9Contribution Margin Analysis14 / 39

Based on the quantitative analysis, the contribution margin for processed recycledmaterials from greatest to least is: Aluminum, PET plastics, OCC, mixed paper, andglass.Profitability Analysis and Discounted Cash Flow AnalysisAll options except option 1 will meet the board’s objectives to increase the recyclingdivision operating income by 5% in 2021. In 2022, all options will meet the 5%requirement.It is still possible for profitable investments to generate negative cash flow. A discountedcash flow analysis has been made to further compare the options.An appropriate timeframe to do a discounted cash flow analysis is 10 years becausethis is the useful life of the equipment. The NPV of the aluminum investment is 6.4Mand the NPV of the PET plastics investment is 2.8M.Strategic AlignmentClosing the recycling plant is not in line with WDI’s vision and mission of beingenvironmentally responsible and providing recycling services to customers, whereasupdating the plants.FinancingRequirements PET plastics requires 10M Aluminum requires 20MOptions Utilize Starlight Capital loan for 10M Kinsley can purchase more non-voting preferred sharesFinancial ReportingInventory may be overvalued because it may not be calculated at the lower of cost andnet realizable value (ASPE 3031).Tax ImplicationsWDI can opt to claim CCA up to 100% on the class 53 equipment in the first year,resulting in tax savings of 4.6M for Aluminum equipment in 2021 and 2.3M for PETplastics equipment.15 / 39

Option #4: Investment in Pristine Research Inc.The board is considering acquiring 45% ownership of Pristine to expand into thehazardous waste cleanup business.Qualitative AnalysisProsCons Pristine excels at technologicalinnovation. This investment isaligned with WDI’s goal to be inthe lead of technologies. R&D is subjected to time andtechnological uncertainty,increasing the risk of thisinvestment. Pristine has high growth prospectsdue to increased regulations andincreasing demand for oil spillscleanup technology, leading to apotential revenue increase. Itsstrong financial performance alsoaligns with Laura and Brian’s goalto expand into segments withhigher margins. The transaction will close inearly March 2021. This timeconstraint may limit WDI’s abilityto conduct rigorous duediligence to identify any financialor operational issues. Opportunity to enhance WDI’sreputation and promoteenvironmental responsibility bysupporting Pristine’s R&D. From a tax perspective, thetransaction involves a sharepurchase which is inherentlyunfavorable to WDI. Share purchase option enablesWDI to control a well-establishedcompany at a lower cost. Capital requirement results in asignificant cash outflow, maynot meet Kingsley’s objectivesand Brian’s investing approach.Quantitative AnalysisValuationSee Exhibits 10 and 11The value of Pristine shares calculated using the asset-based approach isapproximately 3.7M, and the capitalized cash flows approach puts the share value16 / 39

between 3.5M to 3.8M. The asking price is not reasonable quantitatively as bothvaluations calculated fall below 4M. The recommended maximum purchase price is 3.8M.Ratio AnalysisSee Exhibit 10Pristine's operating margins are significantly higher than WDI, this can improve WDI’stotal operating margin when presented with consolidated financial statements after WDIpurchases additional shares and acquires control of Pristine.Strategic AlignmentThe investment broadens WDI’s service line, thus supporting WDI’s vision to meet thedemands of customers and local communities. It is also in line with WDI’s mission andcore values as Pristine shares similar values of being innovative, sustainable, andenvironmentally responsible.FinancingRequirement 4M is required for the share purchase.Options Accepting the Starlight loan. Issuing convertible preferred shares to KingsleyFinancing ReportingWDI will have significant influence over Pristine after acquiring 45% of Pristine shares.ASPE 3051 Investments requires WDI to use either the cost method or equity method toaccount for this investment, and the investment will be initially recorded at 4M underboth methods. The equity method should be used as this increases the overall incomefrom the investment.17 / 39

Tax ImplicationAs there is no acquisition of control, Pristine will file its own tax return and does nothave to share the small business deductions with WDI. A share purchase means WDIwill not gain the tax advantage of bringing assets up to the FMV to take higher futureCCA. Also, goodwill that arises from share purchase is not eligible for CCA deduction.Additionally, WDI may need to pay Part IV tax on dividends received from Pristine asthey are connected.Decision MatrixAs WDI is looking to meet its future plan and objectives, WDI should use theassessment criteria listed below to help choose the strategic bilityMeetingfinancialgoals greementfor organicfacility Adding aconsultingdivision NotRequired Modifyingrecyclingdivision * Investingin Pristine * Only option 1 of modifying the recycling division does not meet WDI’s vision andmission due to the closing down of the recycling plant.Strategic fit: To align with WDI’s vision, mission, and core values.Long-term sustainability: Have the objectives to lower GHG emissions, increasingavoidance of GHG emissions, increasing the volumes of recycled materials, increasinguse of non-fossil renewable fuels, reducing water usage, and increasing wildlife habitatsurrounding landfill sites been met.18 / 39

Meeting company goals and targets: To ensure the option satisfies WDI’s targetrequired rate of return.Financing availability: To ensure there is available financing for WDI.Differentiation: Aims to distinguish services from WDI’s competitors in the market.RecommendationsInvest in PPP Agreement for organic facilityHaving WDI commit to an organic waste facility requires a very large investment;however, these costs will be lower than typical as the municipalities will front the cost ofthe land and building. This allows WDI to meet its vision and mission by investing in thelatest technology and being environmentally sustainable and meet targeted increaseannual free cash flow by at least 1.7M by 2025. As a result, we recommend WDI toagree to enter into the agreement to build and operate an organic waste treatmentfacility.Invest in adding a consulting divisionThis overall strategic option aligns with WDI’s vision and mission as well as having adifferentiation strategy from competitors. This option does not require any significantcapital investment, which means WDI can use its financing availability for other strategicoptions. Overall, as industry competitors are looking to expand environmental consultingservices to their product line, WDI can have a competitive advantage by adding thisdivision before its competitors and increasing its book of business first.Invest in modifying recycling divisionThis overall strategic option does not align with WDI’s vision and mission since one ofthe options includes closing the recycling plant; however, it does meet the board’sobjectives to increase the recycling division operating income by 5% in 2022. WDIshould proceed with option 2 and recycle those materials that have a positivecontribution margin, while selling any other unprocessed recyclable materials. This wayWDI does not require any capital investment for the recycling plant while simultaneouslyincreasing operating income.Do not invest in Pristine Research Inc.Even though this investment aligns with WDI’s vision and mission, it requires large longterm investment and will not assist WDI in improving total operating margins and freecash flow immediately. Additionally, the risk of this investment is relatively high due tothe uncertainties of R&D. Therefore, WDI should focus on their core business andresources of improving the current operations of the company.19 / 39

Overall StrategyWDI should proceed with investing in the organic facility, adding a consulting division,and modifying the recycling division processes. This strategy aligns best with the overallsuccess factors of WDI and will allow the most significant growth in revenue andoperating profits while also staying true to WDI’s vision, mission, and core values.This strategy allows WDI to continue thriving in the industry, while also expanding theirproduct line, and maintaining their competitive advantage.Implementation PlanStrategic/Operational OptionsTaskBusinessregistrationand yclingdivisionEmployeerecruitmentand trainingTimeFrameChampionStartImmediately2-3 weeks*StartImmediately4-6 weeksMarketingAnnualprocessCommencebusinessStart April 1,2021Modifyoperations(option 2)Modify thedivisionimmediately1-2 weeks20 / 39 JosefinaAngles Externallawyers ThomLancaster Humanresources Brian Leung Salesdepartment LauraSimmons ThomLancaster Peter Zhang DivisionmanagerCostLegalfeesbased onthemarketrate2021salaries: 740,250NoteThesetasks willbe done byMarch 31,2021 350,000for 2021NoneNo upfrontcostNoneNo upfrontcost

FinalizeagreementPPPagreementfor theorganicfacilityMonitor facilityconstructionEmployeerecruitmentand trainingFinancing tteesCorporategovernanceEstablishdisputeresolution BoardmembersMarch 2021From thestart to thecompletionofconstructionStartSeptember20212-3 monthsSeptember20212-3 monthStart early2022Start March20212-3 monthsStart March2021None DivisionmanagerSalaries: 112,500 Peter Zhang HumanresourcesSalariesandbenefits Brian Leung Finance andpurchasedepartment 12M ExecutivemanagementNone BoardmembersNone BoardmembersNone2-3 weeksExpand the BoardStart Juneboard seatsmembersand select new 2021 Nominatingboard3-4 monthscommitteemembersVision and Update vision Executivemissionand missionImmediatelymanagementstatements statementsImplement and Start March ExecutiveBalanceupdatemanagement2021scorecard balanced Division3-4 weeksmanag

software to increase routing efficiency. Effective cost management through vertical integration : Met. WDI operates landfill disposal sites, transfer stations, and collection centers. Reduction of GHG Emissions : Not Met. WDI must reduce GHG emissions by 30% to stay competitive with the industry. Strong customer service ; Met. WDI has high .