Tasty Foods Corporation Worksheet

Only available on StudyMode
  • Download(s) : 345
  • Published : August 1, 2011
Open Document
Text Preview
CASE13CM| | Student Version| | 9/21/96|
| | | | | | |
HEAVENLY FOODS CORPORATION|
Capital Budgeting Methods, Cash Flow Estimation, and Risk Analysis| | | | | | | |
This case combines capital budgeting decision methods, cash flow estimation, and risk analysis| | | | | which are presented in Cases 12I and 13I. In addition, the case focuses on quantifying the| | | | | strategic option value of developing the new line of lite frozen pizzas.| | | | | | | | | | | | |

| | | | | | |
The model develops incremental cash flow estimates, then calculates NPV, IRR, MIRR, ARR, and| | | | | payback for the lite athletic drink project. Also, this model contains a graph which can be used to| | | | | plot the sensitivity diagrams. You can change the data tables, then use them to change the graph. | | | | | Click on the tab labelled 'HEAVENLY' to view the graph. In addition, the option value of the lite | | | | | pizza project is determined. If you are using the student version of the model, some of the cells have | | | | | been blanked out. Before using the model, it is necessary to fill in the empty cells with the | | | | | appropriate formulas. Once this is done, the model is ready for use.| | | | | | | | | | | | |

| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
The following cells have been blanked out:| | | | | | C71, E72, F74:F75, G75, D86, E92, D95, G98:G99, | | | | | | D101, G104, G107, C114, F117, and D129.| | | | | |
=| =| =| =| =| =| |
INPUT DATA:| | | | KEY OUTPUT:| | |
Initial Investment:| | | | | | |
Equipment cost| | #####| | NPV| ######| |
Freight| | #####| | IRR| 0.0%| |
Installation| | #####| | MIRR| 7.2%| |
Change in NWC| | #####| | ARR| 17.4%| |
Operating Flows and Inflation Rates:| | | | Payback| 2.74 | | Unit sales| | #####| | Strategic Opt. Value | | ######| t=0 sales price| | $2.00 | | | | |
Fixed oper costs| | #####| | | | |
t=0 VC per unit| | $1.25 | | | | |
Price inflation| | 4.0%| | | | |
Cost inflation| | 2.0%| | | | |
SV, Taxes, and C of C:| | | | | | |
Salvage value| | #####| | | | |
Useful life (yrs)| | 4 | | | | |
Tax rate| | 40%| | | | |
Cost of Capital | | 12%| | | | |
Cannibalization of Other Projects:| | | | | | |
Revenue Loss| | | ######| | | |
Cost Reduction| | | ######| | | |
Net Cannibalization| | | ######| | | |
| | | | | | |
Black-Scholes Option Valuation:| | | | Strategic Opt. Value | | ######| Lite Pizza Project:| | | | | | |
Yr. 1 Outlay| | #####| | | | |
Yr. 2 CF| | #####| | | | |
Yr. 3 CF| | #####| | | | |
Yr. 4 CF| | #####| | | | |
Av. Cost of Cap.| | 12%| | | | |
Risk-Adj. COC| | 15%| | | | |
Black-Scholes Model Inputs| | | | | | |
Current price| | | P =| ######| | |
Exercise price| | | X =| ######| | |
Risk-free rate of interest| | | r =| 0.05 | | |
Time to expiration| | | t =| 1.00 | | |
Variance of stock returns| | | s^2 =| 0.03 | | |
=| =| =| =| =| =| =|
|::| | | | | | |
MODEL-GENERATED DATA: HEAVENLY FOODS CORPORATION | | | | | | | | | | | | |
Net Investment Outlay:| | | Depreciation Schedule: Basis:| | | ######| Equipment cost| | #####| | MACRS| Dep.| End of Year| Freight| | #####| Year| Factor| Expense| Book Value| Installation| | | ------| ------| --------| --------| Change in NWC| | #####| 1| | $0 | ######|

| | --------| 2| 45%| ######| ######|
| | #####| 3| 15%| | ######|
| | ========| 4| 7%| | |
| | | | ------| --------| |
| | | |...
tracking img