To:Mr. Charlie Harris II, CEO
Subject:Harris Seafoods Inc.: Processing Plant Project Analysis and Recommendation
Your immediate attention is requested. We would like to take this opportunity to discuss our team valuation of accepting Processing Plant Project. We value that Harris Seafoods has evolved into one of the largest producers of frozen shrimp in the United States. We are impressed by company’s remarkable high return on equity of 39% after-tax. Our analysis of the Processing Plant Project will help you make a well informed decision and additionally, it will provide an action-oriented recommendation. We will first identify key issues and risk involved followed by financial support of the project. Our analysis is supported with financial measures of NPV, IRR, CAPM theory and WACC to illustrate if accepting Processing Plant Project would provide acceptable required rate of return for Harris Seafoods.
Key Issues and Risk:
The processing Plant proposal would allow Harris Seafoods to seize the opportunity to expand into shrimp production and sales while utilizing its resources effectively. The expansion in shrimp processing facility would permit the company to grow in terms of return on investment. However, we would like to highlight various risk exposed to Harris Seafoods Inc by accepting the project. We believe that by accepting the project would affect Harris Seafoods high return on shareholder’s equity.
Issues in Shrimp Industry:
The Shrimp Industry appears to be uncertain in terms of shrimp supply. The shrimp beds in the waters off Texas and Mexico were over fished, resulting in it becoming increasingly difficult to find shrimp as stated on page two. It exposes...