Pan Europa Foods

In: Business and Management

Submitted By world1234
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Question 1: Pan-Europa must strengthen the right hand side of the balance sheet now that the price war is over. Summary of the financial figures in Table Exhibit 2 show that the gross sales are almost stagnant over the 3-year period, earnings per share have steadily declined during the same time period, and the market value of shareholder’s equity is at the moment lower than its actual book value. Furthermore, the net income is also down over this 3-year period, and this is where Pan-Europa needs to focus its efforts (capital projects should assist in this effort). Earnings per share, dividends, and shareholders’ equity all fuelled by increase in net income will become critically important to the company and its shareholders in this coming year. Increase in net income would in turn strengthen the shareholders’ equity, earnings per share and dividends, and this would discourage buying shares by those considering a hostile takeover. Trudi Lauf as a proponent of reducing leverage on the balance sheet and understanding the shareholders anxiety should lead the way of Pan-Europa. ___________________________________________________________________________ Question 2: There are three NPV – NPV at Corp WACC (10,5%), NPV at minimum ROR and equivalent annuity. Ranking all projects against each of this category provides slightly different results. However, I used NPV at Corp WACC (10,5%) as this includes the most recent estimated weighted-average cost of capital for Pan-Europa. The results are in the table below: Rank 1 2 3 4 5 6 7 8 9 10 Project Strategic acquisition Market expansion eastward Market expansion southward Development and rollout of snack foods Artificial sweetener Inventory control system New plant Expansion of a plant Plant automation and conveyor systems Replacement and expansion of the truck fleet NVP at Corp WACC (10.5%) 47.97 11.99 9 8.95 5.21 1.16 0.99 0.28…...

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