Why Should Harris Invest Into The Shrimp Processing Plant
Harris Case Analysis
Objective: Should Harris invest into the shrimp processing plant?
Issues:
1. Will this processing plant have a value today that is greater than or equal to the cost today?
-If the NPV of the plant is greater than zero, then we should move forward with the investment.
NPV Analysis:
Value> Cost
Value: PV: Value right now
PV= forecast of future cash returns (FCR)
-We used FCR to determine how much cash we get back and can deem the plan a good investment if we can bring in more than we would we spend. (Sales>Expenses)
Revenues-Increase in A/R each year= Cash revenues
Expenditures (increase in other assets)-Increase in payables=Cash expenditures
Revenues
-Increase in asset accounts
+Increase in payables …show more content…
A/R | 0 | 2416 | 3446 | 1857 | 991 | 1124 | 1267 | Inc. A/P | 0 | 2610 | 3724 | 2006 | 1070 | 1215 | 1369 | Inc. Inventory | 2485 | 2578 | 4747 | 3108 | 1657 | 1892 | 2120 | Inc. Other Assets | 100 | 915 | 1449 | 779 | 416 | 473 | 532 | FCF | -2585 | -2654.76 | -2978.72 | 721.88 | 2985.32 | 3303.24 | 3707.28 | | | | | | | | | PV of FCF at 10% | -2350.00 | -2194.02 | -2237.96 | 493.05 | 1853.65 | 1864.59 | 1902.42 | PV of FCF at 20% | -2154.17 | -1843.58 | -1723.80 | 348.13 | 1199.73 | 1106.25 | 1034.63
Objective: Should Harris invest into the shrimp processing plant?
Issues:
1. Will this processing plant have a value today that is greater than or equal to the cost today?
-If the NPV of the plant is greater than zero, then we should move forward with the investment.
NPV Analysis:
Value> Cost
Value: PV: Value right now
PV= forecast of future cash returns (FCR)
-We used FCR to determine how much cash we get back and can deem the plan a good investment if we can bring in more than we would we spend. (Sales>Expenses)
Revenues-Increase in A/R each year= Cash revenues
Expenditures (increase in other assets)-Increase in payables=Cash expenditures
Revenues
-Increase in asset accounts
+Increase in payables …show more content…
A/R | 0 | 2416 | 3446 | 1857 | 991 | 1124 | 1267 | Inc. A/P | 0 | 2610 | 3724 | 2006 | 1070 | 1215 | 1369 | Inc. Inventory | 2485 | 2578 | 4747 | 3108 | 1657 | 1892 | 2120 | Inc. Other Assets | 100 | 915 | 1449 | 779 | 416 | 473 | 532 | FCF | -2585 | -2654.76 | -2978.72 | 721.88 | 2985.32 | 3303.24 | 3707.28 | | | | | | | | | PV of FCF at 10% | -2350.00 | -2194.02 | -2237.96 | 493.05 | 1853.65 | 1864.59 | 1902.42 | PV of FCF at 20% | -2154.17 | -1843.58 | -1723.80 | 348.13 | 1199.73 | 1106.25 | 1034.63