Euroland Foods

Topics: Net present value, Internal rate of return, Rate of return Pages: 3 (830 words) Published: July 11, 2010
As executive management of Euroland Foods, our goal is to decide on the most beneficial mix of eleven potential projects. The proposed projects focus on market extension, company expansion, increasing efficiency, and the development of a new product. While the total cost of all projects would be EUR 316 million, the budget is EUR 120 million meaning not all the projects can be undertaken. The key factors, among others, we used in order to decide the most fitting proposals were cost, risk-level, payback period and internal rate of return. After evaluating these attributes we decided to endorse and invest in five projects: plant expansion, plant automation and conveyor systems, southward market expansion, effluent-water treatment at four plants, and network, computer-based inventory control system for warehouses and field representatives.

The first capital project of plant expansion is to increase capacity at the Nouremburg, Germany facility. This plant has been experiencing issues in meeting deadlines and timeliness due to a lack of capacity. If these issues were to go unresolved the company’s reputation may be tarnished. This facility has produced many of Euroland Food’s of key products such as their juices, and bottled water. With an increase in capacity an increase in productivity would follow with an internal rate of return of up to 11.2%. Inherent in these changes is the potential for greater efficiency as well.

The next capital project to invest in is plant automation and conveyor systems. This project was proposed by Maarten Leyden who has past experience and expertise in production-cost control. His past success in the area leads us to believe this is the correct step in advancing production. These new systems would be added to six of the slower, less efficient plants. Euroland currently has two newer plants that have already implemented such a system and these facilities have shown an increase in speed of production. The most basic...
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