The challenge remains in selecting projects that will not significantly increase their current debt threshold and not eclipse the earmarked funds for capital investments. It is recommended to select investments that will not necessitate cuts to normal business operations- share dilution or current dividend rates- but lead to greater performance within their marked budget and profitability to shareholders (increase in stock price).
Increasing Net Income, Earnings per Share and Shareholders Equity (market value) are critically Important, as they have steadily declined and are directly correlated to increased overall debt the company Is currently holding. Also of high Importance Is Gross Sales, even though they have been proportionally static despite seeing profitability and earnings steadily decline. Investing In projects that are low-risk, profitable (short and long-term) and promote Growth Sales will result in greater performance over Torture years Ana contribute to playing down ten current protocol AT debt weighing down the company’s profitability.
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Despite what some investors have stated, increasing Total Assets does not lead to overall profitability if those invested assets are not performing efficiently with profitable effectiveness. Pan-Europe should focus on financing capital projects from rent available cash flow reserves that lead to either increasing the efficiency of current operations or explore seeking a new product line (or diversifying existing product lines) to increase Growth Sales in existing markets, with high potential to expand into new markets.
I would choose Equivalent Annuity, as the need for sustained growth is paramount to a struggling company and gives a more holistic view of a realistic growth model. The effluent project seems to be a wise investment, as the investment today saves he company from a substantially larger investment in the future. The investment cost is currently known. The text has stated that passing on technologies today in favor of costs, is a substantially risky price. I would suggest Time Value of Money as a means of evaluation. Even at 10. 4% return (bag. F minimum ROR of all considered projects) over the next four years, it projects to grow to a little under MM if the money was saved today and diverted for investment. It would still leave an additional MM in needed future expenditures, compared to a total MM investment if made today with a now savings of MM. Question 3 It seems there are certain variables that NP does not consider: Risk, Available Resources, Corporate Strategy, and Management Preferences. It also does not consider current condition or needs of existing operations.
When we discuss “correct” for each variable, I assume this means account for to accurately consider. Time Value of Money is a measure that considers the ROR and Investment. To adjust, the appropriate discount rate needs to be thoroughly examined. I also like to consider Future Value (precise point in time) as a measuring tick, rather than assuming perpetual growth. The only mention in the chapter text that accounts for return over a precise time period for all projects is the Equivalent Annuity mentioned in the case study. It should be utilized as it projects impact over 10 years.
Risk is accounted for as a measure of not receiving a return on your investment or in the defined payback period. Increase the defined ROR to eliminate projects that do not meet a minimum threshold. I would also examine adjusting the expected necessary cash inflows to reflect an accurate payback period to keep operations functional and the investment viable. Size reflects the amount of investment needed. Ensuring that the investment is profitable is important. All projects, especially with large ones, need to compare benefits to cost.
The text refers to gauging these values using the Profitability Index as a solution to level the analysis regardless of project size. Question 4 The following are examples of nonnumeric projects: Effluent Water, Development of New Sweetened Yogurt and Ice Cream, Plant Automation, Roll-out Snack Foods and Acquisition of Leading Schnapps Brand. Regarding “must do”, I would recommend en Effluent water as It saves ten company money Ana reduces rills, even tong It has no numeric value. Also, Plant Automation seems like it’s a potential company liability if it exposes employees to injuries.
Effluent Water is less risky because it could potentially save the company millions in the coming years. Plant Automation for the same reasons. The more risky projects are the ones leading to an extension of new product or business (Snack Foods, Acquisition). There is always a risk of entering a new market because the potential benefit cannot be accurately gauged (high upside with no ceiling). I think the Snack Food could be competing for similar resources of company resources, as they seem to brand new products into its line, while utilizing existing infrastructure to support it.
Development of New Yogurt and Ice Cream could create a synergy amongst their products as it could unite the product line of their low-fat brads. They could utilize and merge the marketing strategies and branding. Snack Foods (dried fruits) and Artificially Flavored Yogurt/lace Cream certainly could help reshape the company’s brand image into breaking into a “healthy alternative”. Additionally, Effluent Water could be categorized as being environmentally conscious marketing effort.
Snack Foods tests the minimum payback and investment return criteria, while realizing an expansion of new lines and opening new markets. Inventory Control pays dividends to the organization by realizing cost savings and having immediate return on minimal investment (comparatively). It also has very low payback period of initial investment. Integrity Statement “l have completed this assignment on my own accord. No outside inputs (other than allowed resources) affected my decision processes or my conclusions. I affirm that I have completed this assignment in accordance with the Code of Academic Integrity. ” Name: Robert W. Jenkins