Pan Europa Foods Case Study

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Pan-Europa Foods
Corporate Strategy Analysis
Prathibha Vemulapalli
Cleary University

1. Pan-Europa should not cut the dividends as it might signal a lack of faith in future to its investors and shareholders. Selling new stocks at the current low price to raise the capital is also a bad idea that can potentially put the shareholders in dilemma. They must improve the performance to make the investors come forward to invest in the business. They should concentrate in decreasing the capital spending and increasing the stock price and should decrease their debt by avoiding over spending. They should not increase their assets by debt financing as their debt –to-equity ratio is extremely high after the price war thus making them highly leveraged. Fabienne Morin and Nigel Humbolt should be leading these strategic improvement projects since they encouraged growth and increased market share.
2. While we have three different ways to calculate NPV from the exhibit, NPV at the minimum accepted Rate of Return includes a risk premium so it stays constant even with varying project durations. WACC on the other hand has difficulties in maintaining the capital structure therefore Equivalent Annuity should be used in this case. The order of the projects would be 1. Strategic Acquisition 2. Eastward Expansion 3. Snack Foods 4. Southward Expansion 5. Inventory Control System 6. Artificial Sweeteners 7. New Plant 8. Expanded Plant 9. Automation and Conveyor System 10. Expand Truck Fleet 11. Effluent Treatment Program
Since the Effluent Treatment Program is not subjected to NPV, we can say it as an investment of $4 million to compensate a cost of $10 million in 4 years like mentioned in the case.
3. Political aspects of the organization, corporate strategy and its incompatibilities, Regulations pertaining to safety and environment, Risk…...

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