Euroland Case

Topics: Investment, Net present value, Capital accumulation / Pages: 3 (698 words) / Published: Apr 21st, 2010
Euroland Foods S.A.
Capital Budget

3/11/2010 Group 6

Euroland Foods S.A.

Out of the 11 capital projects considered for the upcoming year our team has developed a strategy which will propel Euroland foods into the next level of global business. Under the board of directors spending limit of EUR120 million EUR119.25 million would be invested in our proposed projects. Our allocation of funds that best suits Euroland foods are based on NPV, economics, share value, and payback period. The various capital projects were also considered on the track record of the manager supporting each project and the probability of market share gain, brand image, and share value growth. The capital projects proposed are the expansion of a plant, effluent-water treatment at four plants, market expansion southward, acquisition of a leading schnapps brand and associated facilities, and a partial replacement and expansion of the truck fleet.

Expansion of Plant

The Nuremburg plant is experiencing some difficulties in reaching deadlines and scheduling production. It is at full capacity and is in need of expansion. This plant supplies both central and Western Europe so meeting its required production is at much importance. Mr. Maarten Layden backs this project on his knowledge on cost control. Scheduling needs must be accurate in order to meet budgets. This will reduce cost and also meet consumer demand by supplying at its fullest yielding an IRR of 11.2% it exceeds the minimum ROR of 10%.

Effluent-water treatment at four plants

The four year deadline to meet mandatory compliance to treat waste water will be here in no time. If Euroland Foods purchases the necessary equipment today at EUR6 million rather than in four years at EUR15 million the savings will be EUR9 million. European regulatory agencies are already on the forefront of waste water pollution and have been known to shorten compliance time. Euroland Foods must address this environmental issue

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