Case Study.pdf - Corporate Finance Case Study 1 邓 博文...

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Corporate Finance: Case Study 1 博文 1300017659 叶芷欣 1602010411 庄雄 1300015462 1300017626 1. Brief Summary of the case: land Foods is a very big company producing ice cream, yogurt, bottled water and fruit juices. This company’s revenue structure, consisting of these four products, is listed below: Figure 1 The Revenue Proportion of Each Product Euroland Foods’ headquarters is located in Brussels, Belgium. It has nine other plants sitting in Belgium, France, Germany, Denmark, Sweden and England respectively. Its products are popular across its sales region, especially the Ice Cream, its leading product. 1) Strategy and Budget Making: Euroland Foods orders an annual capital budget. The process before the budget is finally adopted is pretty complicated. First, there is a committee of senior managers that makes the budget plan annually. The committee consists of seven members: one PDG (president directeur-général), one finance director and five managers. The PDG will collect other members’ suggestions and make a proposal considering the payback and IRR tests. However, this committee doesn’t have the power to decide on the budget. They have to present the budget plan to the board of directors who makes the final decision on the budget plan. 2) Wilhelmina Verdin We choose Wilhelmina Verdin to be the assumed management committee member. As a member of the biggest stockholders – Verdin family, Wilhelmina is the PDG of the committee. She has a great experience in brand management and new product introduction and has already shown her prominent ability during her past managing career. She focuses more on long-term growth and stability. In the meantime, she is Ice Cream 60% Yogurt 20% Bottled Water 10% Fruit Juices 10%
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pretty cautious about the company’s present debt and sales condition, suggesting that she may make a comparable chary and farsighted proposal. 3) Debt Situation The debt-to-equity ratio of the company is 125 percent, which is much higher than its peers in European consumer-foods industry. Another difficulty is that the company has great pressure as their common stock were priced below average. Therefore, Euroland Foods have some targets this year. Firstly, it is to build up its assets. However, it should not be financed by more debt. Secondly, it is to not cut dividend. In conclusion, the board voted unanimously to limit capital spending to EUR120 million in 2001. Figure 2 Shares Euroland Foods's 20% Company executive 10% Venus Management 12% Banque du Burges etdes Pays Bas 9% Widely held 49%
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2. Rationale for choice of projects The firm should ultimately invest in projects 7, 8, 9, 10 (as numbered in exhibit 3) and the purchase of effluent-water treatment at four plants.
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