Capital Budgeting Method and Cash Flows Estimation
Capital Budgeting Methods and Cash Flow Estimation
Tasty Foods Corporation (Part A)
November 5, 2012
Executive Summary: Tasty Foods has seen phenomenal growth throughout its lifetime in large part due to a continuous development of innovative new products. Although prosperous for Tasty Foods from its birth, this is a business initiative that in the past years, Tasty Foods has not maintained. Consumers are shifting towards a more health conscious lifestyle and until now Tasty Foods has not presented any new products to capture this segment of the market. Abigail developed a product called High Energy to target the health conscious and athletic consumer without taking into account the high fat content per serving. To amend this oversight, the idea for High Energy-Lite was born. High Energy-Lite rides on the strengths of High Energy while also being able to overcome its weakness, the 5 grams of fat per 8 ounce serving. The results of a test marketing program undertaken by Tasty Foods showed that the lite version of High Energy would be widely accepted and it is Abigail’s belief that High Energy would receive a larger market share if it were offered in a lite version. As the hired consulting firm, it was our job to determine whether undertaking the development of High Energy Lite would in fact be as profitable a project as Abigail believed.
Through careful analysis of different factors, our consulting firm has concluded that this project should be undertaken. We have taken important aspects of introducing a new product such as cannibalization as well as lease costs and inflation rates to determine the profitability of this project. The profitability of this project, coupled with the enthusiastic acceptance of the test marketing program carried out earlier this year, will allow Tasty Foods to strengthen its position in the marketplace by entering into the “athletically inclined and health conscious” demographic. We believe this is a great opportunity and
Tasty Foods Corporation (Part A)
November 5, 2012
Executive Summary: Tasty Foods has seen phenomenal growth throughout its lifetime in large part due to a continuous development of innovative new products. Although prosperous for Tasty Foods from its birth, this is a business initiative that in the past years, Tasty Foods has not maintained. Consumers are shifting towards a more health conscious lifestyle and until now Tasty Foods has not presented any new products to capture this segment of the market. Abigail developed a product called High Energy to target the health conscious and athletic consumer without taking into account the high fat content per serving. To amend this oversight, the idea for High Energy-Lite was born. High Energy-Lite rides on the strengths of High Energy while also being able to overcome its weakness, the 5 grams of fat per 8 ounce serving. The results of a test marketing program undertaken by Tasty Foods showed that the lite version of High Energy would be widely accepted and it is Abigail’s belief that High Energy would receive a larger market share if it were offered in a lite version. As the hired consulting firm, it was our job to determine whether undertaking the development of High Energy Lite would in fact be as profitable a project as Abigail believed.
Through careful analysis of different factors, our consulting firm has concluded that this project should be undertaken. We have taken important aspects of introducing a new product such as cannibalization as well as lease costs and inflation rates to determine the profitability of this project. The profitability of this project, coupled with the enthusiastic acceptance of the test marketing program carried out earlier this year, will allow Tasty Foods to strengthen its position in the marketplace by entering into the “athletically inclined and health conscious” demographic. We believe this is a great opportunity and