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Answer: As suggested by their bank they should reduce their debt due to the high debt to equity ratio Incurred during the price wars and use their competitive market reach to attain this. * c. Who should lead the way for Pan-Europe? Answer: Humboldt and Moron should be leading the charge on this strategy since these folks are the ones Initiating the Innovative changes In the company. Question 2: a. Using NAP, conduct a straight financial analysis of the investment alternatives and rank the projects. Which NAP of the three should be used?
Due to the duration of the project it would be wise to use the Annuity instead since it erects discrepancies project durations unlike the NAP. Using this analysis the preferred project would be 11, the Strategic Acquisition. Then following in order would be: * Eastward Expansion Snack Foods Southward Expansion Inventory Control System * Artificial Sweeteners * New Plant * Expanded Plant * Automation and Conveyor System * Expand Truck Fleet * Effluent Treatment Program (which has no NAP) While the Effluent Treatment Program has no formal NAP It can be considered an investment of MM now to save a cost of MOM In 4 years.
Question 3 a. What aspects of the projects might invalidate the ranking you just derived? I nerve are many aspect They include * Risk TTS Tanat could Invalid Tate ten simple NAP analysis AT ten projects * Political considerations * Regulatory issues including health, safety and environmental with corporate strategy * Resource availability * Incompatibility b. How should we correct for each investment’s time value of money, unequal lifetimes, rockiness, and size? Different analysis techniques and different assumptions can be used to correct for the various factors that affect each project differently.
For example: * The time value of money reliable measures are discounting methods such as NAP or AIR. * Unequal lifetimes of the projects are solved using Equivalent Annuities. * Risk can be dealt with by increasing the hurdle rate. * Different project sizes can be can be measured by multiplying the NAP by the ratio of the size of the projects or by using a profitability ratio. Question 4 Reconsider the projects in terms of: a. Are any “must do” projects of the nonnumeric type? The Effluent project is a must do project.
The Automation and Conveyor Systems might be a must do since it is a health hazard to employees. These impose both safety and environmental issues. . What elements of the projects might imply greater or lesser rockiness? Answer: Projects that involve small technology changes like expanding the truck fleet would have low risk. Increasing levels of technological sophistication such as automation or introducing artificial sweeteners into products would also increase implementation risks.
Another risk area for any producer in a capitalist environment is attempting to increase markets with new products in new areas. The prospective customers may simply choose to not buy the product. Other elements of risk include project size, implement and length of the period of return. C. Might there be any synergies or conflicts between the projects? Answer:There are real synergies between the plant expansion/additions, automation, truck upgrade and the geographic expansion projects. D.
Do any of the projects have uncommunicative benefit TTS or costs that should be considered in an evaluation? Answer: Projects that have uncommunicative costs and benefits would include: * Projects that impact the company’s regulator compliance such as effluent treatment (environment) and warehouse automation (safety). Several of the projects could impact the company’s image. For example, the snack roll could De positive Decease AT I TTS winsome connotations Wendell ten acquisition of the schnapps brand could be negative.
The effluent project could be positive by showing the company’s willingness to act on environmental concerns early. Similarly the automation project could be cast a positive step towards increased safety. The plant expansion project may be positive or negative depending on whether the community reacts to new Jobs or factory encroachment. * * Question 5 Considering all the above, what screens/factors might you suggest to narrow down he set of most desirable projects? 1) I would recommend four screens be applied using the following factors: * Does the project incur a high cost?