Case Study of Euroland Food S. A.
The case of Euroland Food S. A. is about a multinational business that generates high-quality ice cream, yogurt, bottled water, and fresh fruit juices. Euroland Foods was founded in 1924 by Theo Verdin. The efficiency of the organization was steady over the years, nevertheless since 1998 to 2150 the company acquired no growth. The management team thought that was because of the low inhabitants growth in northern European countries and market saturation in a few areas. The management crew hoped that increase in market share and revenue would help company progress.
Eurplamd food contains a senior administration committee appointment at every beginning of the year. The meeting may help company's panel director to determine the new capital budget in this year. In the latest conference in January 2001, the senior management committee offered company's plank of owners 11 major projects, total counted about EUR316 mil, but in this coming year the spending limit on capital job was only EUR120 , 000, 000, so it was necessary to pick the best projects that will aid company development and improve the shareholders' wealth.
In these 11 jobs, four assignments are regarding product or market extendable, three tasks are about new product or new markets, three projects are about efficiency advancements, and one project is all about safety or environmental. The business has a minimal acceptable IRR and optimum acceptable repayment years in each category. You can find the knowledge on Show 1 .
Ranking all of these projects was your first thing must be done. Depending on the NPV at Corp. WACC(10. 6%) and IRR gave the very best understandable reply to the company's plank of owners. You can find this kind of ranking of criteria about Exhibit 2 .
The first one inside the ranking list is the project of Strategic Acquisition. The project contains a high come back EUR198. your five million, but the expenditure was high too about EUR55 million. The 2nd one for the ranking list will be the Southward Expansion, the expenditure on this project can be EUR30 , 000, 000. The job will create about EUR56. 25 mil in 10 years. Number three on the rating list will probably be Artificial Sweetener or Eastward Expansion, the payback period and NPV in these two projects will be almost same. There is only about 1 . seven percent IRR distinct between those two projects and the paybacks had been the same, both were five years. Therefore based on Simply Financial Factors and under EUR120 , 000, 000 spending limit, the company consider the top several projects to make the decision the capital spending budget.
The Exhibit three or more was depending on projects spending and the Demonstrate 4 was based on jobs return. Those two ranking list show the diverse between every single project's weighing scales. The ranking list demonstrates that normally large amount investment could have large amount go back. Except the project of recent Plant( Dijon, France), This project has got the second biggest expenditure within the list but simply rank the 5th in return.
The Exhibit your five shows the Profitability Index of every project. The very best one in this kind of ranking list will be the task of Snack Foods. Its Profitability Index is usually 1 . 14 which means every 1 Pound investment will have 1 . 18 Euro in exchange. Also you can discover each project's profitability Index calculation stages in Exhibit 6.
The Display 7 displays the Payback period. The payback period shows the chance of each task, usually the project provides a shorter repayment period may have less risk. The best job in this rank list is definitely the project of Inventory-Control Program; it only has three or more year repayment.
In Exhibit eight will reveal the First year earnings of each project.
The Project in the Effuent-Water Treatment at Several Plants wasn't including in different of the rating list because is the task that classed in the environmental category. The project requires a EUR6 mil investment today and will price EUR 15 million in four years when the quick conversion become mandatory. The company should accept this job today because in both equally financial factor and sociable...