Pan Europa

Topics: Net present value, Project management, Time value of money Pages: 8 (2176 words) Published: April 10, 2013
Pan Europa Foods S.A.*
Autum Black
Alan shaw
Matt dawn
Purdue University
Introduction to Project Management
Dr. Peter desouza

Executive Summary

Case Diagnosis

Pan Europa management heavily relied on debt financing to sustain firms capital spending dividends. Their share values in the market were low and not competitive. Moreover the shareholders lost confidence in the company’s performance resulting in decreased share value and low profitability. The company is struggling in its objectives to diversify in its products and expand within and geographically.

Case Analysis
Question 1)
Strategically, what must Pan-Europa do to keep from becoming the victim of a hostile takeover? What rows/categories in Exhibit 2 will thus become critically important in 1993? What should Pan-Europa do now that they have won the price war? Who should lead the way for Pan-Europa? Analysis-

Pan Europa must be able to retain its current shareholders satisfied with the company’s achievements. The company must prove that they are aggressive in their strategy and approach. This can be achieved through a) Product Expansion.

b) Efficiency Improvements.
c) Modest Market Expansion.
By doing so the shareholders would be able to retain their shares and can thereby increase the market value. We feel that Wilhelmina Verdin would be the best candidate to lead the company. Ms. Verdin has expertise in brand management and marketing. He has escalated the company’s success by introducing low-fat yoghurt and ice-cream. Question 2

Using NPV, conduct a straight financial analysis of the investment alternatives and rank the projects. Which NPV of the three should be used? Why? Suggest a way to evaluate the effluent project? Analysis)

In order to rank the projects based on NPV calculations, the preferred metric will be the NPV at minimum Rate of Return. A sliding scale of Internal Rate of Return (IRR) that understands the differences in risk associated with various types of project is used in the calculations. When evaluating the projects in this way the preferred ranking can be formulated Project numbers| Project name| NPV at Minimum ROR|

1| Strategic Acquisition| 41.43|
2| Eastward Expansion| 9.90|
3| Snack Foods| 7.31|
4| Southward Expansion| 7.08|
5| Artificial Sweeteners| 3.88|
6| New Plant| 1.87|
7| Inventory Control System| 1.78|
8| Expanded Plant| .55|
9| Automation & Conveyor| .32|
10| Expanded Truck Fleet| -.13|

Evaluating effluent project would be considered something as time sensitive project. This project can be evaluated by comparing the cost of executing the project in the present rather than completing the project in four years when the immediate conversion will become mandatory. The current cost of the project is 4 million Euros while the cost in four years is expected to be 10 million Euros. . The PV of the future cost is expected to be little more than 4 million euros when considering the 10.5% Weighted Average Cost of Capital. Therefore we can safely say that it is much more economical to have the effluent project in the present than to delay into the future. Oracle Crystal Ball - Risk analysis with uncertainties in project selection. Crystal Ball software is a statistical data analysis software package used by business for a variety of purposes. Crystal Ball software is a leading spreadsheet-based software suite for predictive modeling, forecasting, Monte Carlo simulation and optimization. Crystal Ball is used in over 800 universities and schools worldwide for teaching risk analysis concepts1. Oracle Crystal Ball enhances your Excel model by letting you create probability distributions that describe the uncertainty surrounding specific input variables. This model includes sixteen probability distributions, referred to in Oracle Crystal Ball as "assumptions." Each assumption cell is colored green.This model also includes one Oracle Crystal Ball...
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