|Harris Seafoods Inc. | Memorandum To: Mr. Charlie Harris II‚ CEO From: student 103 CC: Professor Date: 11/22/11 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
Premium Net present value Cash flow Internal rate of return
Harris seafood As a shrimp industry Harris Seafood Inc. is one of the biggest producers of frozen shrimp in the United States. Company has reached approximately $33mln of sales by 1979. Despite the risks of supply and demand of shrimp‚ company has been very successful in terms of average profitability. Our role as analysts was to decide whether processing plant project is a worthwhile addition to Harris Seafoods. Analyst assumptions The valuation of the firm starts in year 1980. The 48% marginal
Premium Marketing United States Fish
Harris Seafood Question Number One (1) Value the processing plant proposal. Ignore the Industrial Revenue Bond financing. Assume: Market Risk Premium 8.8%‚ Riskless Rate 11.41%‚ and Harris Long Term Debt Rate 13.5%. Our approach to valuing the processing plant can easily be decomposed into three distinct steps first‚ find the value of the foreseeable free cash flows. Next‚ calculate the terminal value of the project. Finally‚ take the present value of those flows. The next few paragraphs walk
Premium Net present value Cash flow Free cash flow
Harris Seafood Answer the following questions a. Should Harris Seafoods enter the shrimp processing business by building the new plant? Please assume the firm will be unable to use the Industrial Revenue Bond financing mentioned at the end of the case (we will return to this topic in a later case). Yes‚ I think that this company should build a new plant that allows them to grow in the industry‚ even if they are unable to use the Industrial Revenue Bond‚ they will have other financing alternatives
Premium Free cash flow Cash flow Weighted average cost of capital
9 Calculating WACC Mullineaux Corporation has a target capital structure of 60 percent common stock‚ 5 percent preferred stock‚ and a 35 percent debt. Its cost of equity is 12.5 percent‚ the cost of preferred stock is 5.5 percent‚ and the cost of debt is 7.2 percent. The relevant tax rate is 35 percent. a. What is Mullineaux’s WACC? b. The company president has approached you about Mullineax’s capital structure. He wants to know why the company doesn’t use more preferred stock financing
Premium Weighted average cost of capital Preferred stock Corporate finance
at 4.5% * JP Morgan has issued an estimate for Expected Market Return at 8.5% * Euribor is 2% * Before tax cost of debt = 5% * Tax rate = 30% Please calculate the weighted average cost of capital (WACC) for this firm. 2. You are now asked to calculate the WACC for a toothpaste manufacturer with the following data: * Average share price for last 6 months = €34/ share * Current year’s dividend = €3/ share * Applicable growth rate = 3% * Tax rate =
Premium Weighted average cost of capital Finance Interest
2. What is the maximum price they could expect to pay Monmouth‚ based on an analysis of valuation using discounted cash flow‚ calculation of WACC and terminal value determination? 2. Based on the DCF valuation and using a WACC of 8.25% (the beta assumed to be 1‚ the average beta of comparable firms and the coupon rate to be 7.96%‚ the rate for BB rated companies) and a growth rate of 5.5%. The fair price is $40.4 per share for Robertson‚ lower than the $50 offered by Simmons to sell their
Premium Discounted cash flow Market value Generally Accepted Accounting Principles
SFI00 SEAFOOD INDUSTRY TRAINING PACKAGE Seafood Processing & Seafood Sales & Distribution Streams Qualification Stream: Aquaculture SFI 1 01 00 SFI 2 01 00 SFI 3 01 00 SFI 4 01 00 SFI 5 01 00 SFI 1 02 00 SFI 2 02 00 SFI 3 02 00 SFI 4 02 00 SFI 5 02 00 SFI 3 03 00 SFI 5 03 00 SFI 3 04 00 SFI 4 04 00 SFI 5 04 00 SFI 1 05 00 SFI 2 05 00 SFI 3 05 00 SFI 4 05 02 SFI 5 05 02 SFI 2 06 00 SFI 3 06 00 SFI 4 06 00 Certificate I in the Seafood Industry (Aquaculture) Certificate II in the Seafood Industry
Premium Vocational education National Vocational Qualification Fishing
CAPITAL BUDGETING Cost of Capital Evaluating Cash Flows Payback‚ discounted payback NPV IRR‚ MIRR The Cost of Capital • Cost of Capital Components – Debt – Common Equity • WACC Should we focus on historical (embedded) costs or new (marginal) costs? The cost of capital is used primarily to make decisions which involve raising and investing new capital. So‚ we should focus on marginal costs. What types of long-term capital do organizations use? nLong-term debt nEquity Weighted
Premium Net present value Internal rate of return
as the discount rate in net present value (NPV) project appraisal techniques.1 The weighted-average cost of capital (WACC) represents the overall cost of capital for a company‚ including the costs of equity and cost of debt‚ weighted according to the proportion of each source of finance within the business. In easy words WACC measures a company’s cost to borrow money. The WACC equation is the cost of each capital component multiplied by its proportional weight and then summing: Where: Re
Premium Finance Investment Weighted average cost of capital