Case Analysis of Euroland Foods S.A. Plus a New Implement Strategy
In the case of Euroland Foods, we face to the constriction of capital spending (initial investment) equal Euro 120 million for 11 projects. How can we cope with this investment?
Which projects should be chosen?
My analysis is based on two categories as follows:
1) Quantitative Analysis (Internal Analysis)
I used from Capital Budgeting Techniques below cited:
-Sensitivity Analysis
I consider IRR as independent variable, NPV at minimum ROR and Equivalent Annuity as functions (just like Polynomials function in Math) for each 10 projects because project 6 (Effluent – water treatment at four plants) definitely should be done.
According to this analysis I found the location of abruptions and ranked projects by higher IRR.
- Profitability Index
It can be calculated by using of WACC (10.6%) and free cash flows.
- Reinvestment Rate Comparisons for projects at WACC and IRR
It has been done by using of Conflicting Ranking concept and ranked by higher IRR and NPV
- Annualized Net Present Value (ANPV) Approach
It has been ranked in accordance with ANPV.
- Double Discounting Technique
According to this technique, FCF of all of projects have been discounted and changed to the least years of FCF. Then, all projects are ranked by IRR and NPV.
All above techniques have approved the projects as follows:
-Project 2. A new Plant (Dijon, France)
This project (2) will be compulsory, if we choose project (7)
-Project 7. Southward Market Expansions
-Project 11. Strategic Acquisition
-Project 6. Effluent – water treatment
But since there is not enough initial investment, we have to take a decision between two options as follows:
Option (1):
-Expanded Plant (Nuremberg, Germany)
-Eastward Expansion
- Strategic Acquisition
-Effluent – water treatment
Total initial investment = Euro 111 million
Total Rank = 108 Score
Option (2):
- Development and introduction of new artificially sweetened yogurt
-
Which projects should be chosen?
My analysis is based on two categories as follows:
1) Quantitative Analysis (Internal Analysis)
I used from Capital Budgeting Techniques below cited:
-Sensitivity Analysis
I consider IRR as independent variable, NPV at minimum ROR and Equivalent Annuity as functions (just like Polynomials function in Math) for each 10 projects because project 6 (Effluent – water treatment at four plants) definitely should be done.
According to this analysis I found the location of abruptions and ranked projects by higher IRR.
- Profitability Index
It can be calculated by using of WACC (10.6%) and free cash flows.
- Reinvestment Rate Comparisons for projects at WACC and IRR
It has been done by using of Conflicting Ranking concept and ranked by higher IRR and NPV
- Annualized Net Present Value (ANPV) Approach
It has been ranked in accordance with ANPV.
- Double Discounting Technique
According to this technique, FCF of all of projects have been discounted and changed to the least years of FCF. Then, all projects are ranked by IRR and NPV.
All above techniques have approved the projects as follows:
-Project 2. A new Plant (Dijon, France)
This project (2) will be compulsory, if we choose project (7)
-Project 7. Southward Market Expansions
-Project 11. Strategic Acquisition
-Project 6. Effluent – water treatment
But since there is not enough initial investment, we have to take a decision between two options as follows:
Option (1):
-Expanded Plant (Nuremberg, Germany)
-Eastward Expansion
- Strategic Acquisition
-Effluent – water treatment
Total initial investment = Euro 111 million
Total Rank = 108 Score
Option (2):
- Development and introduction of new artificially sweetened yogurt
-