Upstate Canning Melegari
Upstate Canning Case
Giacomo Melegari
A. Conclusion/Statement of Case Situation:
Based on my results Mr. Shields’ should accept Mr. Fordham’s proposal for the acquisition of Upstate Canning Company. The $35,000 comes from Mr. Fordham’s savings and the $65,000 additional investment from associates. The $300,000 loan allows for Mr. Shields to have time to pay Mr. Fordham in full. The Bond repayment schedule offered by Mr. Fordham to Shields is additionally an excellent discount for Mr. Shields to choose should he wish to prioritize the ownership goal over the income increasing goal for 5 years, benefitting him in the long run (this depends largely on his personal discount rate). In turn the repurchasing incentive benefits Mr. Fordham who wishes to see his company sold and see his money quicker rather than later. The investors are simply looking for a good return given the 12 percent typical market rate and the additional risk in this specific venture. The model I have come up with shows that it is very possible within these bounds for Mr. Shields, Fordham, and the investors all to achieve their objectives.
B. Pro Formas First Year Monthly:
1-YEAR INCOME STATEMENT (MONTHLY):
Sales of $850,000 are distributed throughout the year with 50 percent in July-October, 20% November-December, 30% January – June
Cost of Goods Sold like in 1956 equal to 74% of sales, of which Variable Costs 89% Fixed Overhead 11%
Gross Profit sales-COGS
Selling & Delivery equal to 8 percent of sales each month like in 1956
Administrative & General equals 56k – 20k Fordham salary, distributed evenly
Shield’s Salary 15k split evenly
Total SG&A Expenses equal selling & delivery + administrative & general + Shield’s salary
Bond interest equals of 3% current long term debt plus 3% of long term debt, split monthly and not annually
Note interest 6% interest on the notes payable account; notes payable * (6%/12months).
Interest
Giacomo Melegari
A. Conclusion/Statement of Case Situation:
Based on my results Mr. Shields’ should accept Mr. Fordham’s proposal for the acquisition of Upstate Canning Company. The $35,000 comes from Mr. Fordham’s savings and the $65,000 additional investment from associates. The $300,000 loan allows for Mr. Shields to have time to pay Mr. Fordham in full. The Bond repayment schedule offered by Mr. Fordham to Shields is additionally an excellent discount for Mr. Shields to choose should he wish to prioritize the ownership goal over the income increasing goal for 5 years, benefitting him in the long run (this depends largely on his personal discount rate). In turn the repurchasing incentive benefits Mr. Fordham who wishes to see his company sold and see his money quicker rather than later. The investors are simply looking for a good return given the 12 percent typical market rate and the additional risk in this specific venture. The model I have come up with shows that it is very possible within these bounds for Mr. Shields, Fordham, and the investors all to achieve their objectives.
B. Pro Formas First Year Monthly:
1-YEAR INCOME STATEMENT (MONTHLY):
Sales of $850,000 are distributed throughout the year with 50 percent in July-October, 20% November-December, 30% January – June
Cost of Goods Sold like in 1956 equal to 74% of sales, of which Variable Costs 89% Fixed Overhead 11%
Gross Profit sales-COGS
Selling & Delivery equal to 8 percent of sales each month like in 1956
Administrative & General equals 56k – 20k Fordham salary, distributed evenly
Shield’s Salary 15k split evenly
Total SG&A Expenses equal selling & delivery + administrative & general + Shield’s salary
Bond interest equals of 3% current long term debt plus 3% of long term debt, split monthly and not annually
Note interest 6% interest on the notes payable account; notes payable * (6%/12months).
Interest