Claravale Farm, Inc. (CVF) is a legacy dairy farm located in Illinois. It started out as a small farm in the late 1800s and is now being run by the family's fourth generation. Through various consolidations of surrounding farms, CVF has become a large dairy farm with 4,000 cows, black and white Holsteins, fawn-colored jerseys, along with mottled crossbreeds of the two. The Claravale family takes a lot of pride in their farm and cares for their animals greatly. CVF is currently relying on equipment and aging technology that has been partly acquired via farm consolidations over the years. The CVF's CEO, Scott Claravale, has decided that it was time for the farm to rely more on available technology and to update some of the equipment used on the farm. Based on his knowledge of the milk industry in Illinois, the CEO has determined that he needs to grow CVF to $15 million in annual sales in order to be able to compete with the top 10 farms. He does not want to add cows to his farm at this point, and he is acutely aware that CVF cannot grow and remain profitable if he does not authorize some capital spending. Scott Claravale is willing to consider approving around $10 million in capital spending. He has not yet decided how the capital expenditures will be funded, but he understands that a combination of external financing and additional paid-in capital may be needed. Scott Claravale has asked his executive team to research and propose capital expenditure projects that would significantly improve their respective department as well as create the most value for the dairy farm. His executive team consists of: Ryan Claravale, Operating Officer Justin Claravale, Livestock Feeding Manager Chris Cornwall, Milking and Storing Manager Janet Ulrich, Pasture Manager Adbul Ben-Abbes, Herd Health and Reproduction Manager After many strategic meetings, the following projects were identified as making the most sense for CVF to invest in. Your services have been retained to conduct an analysis of the proposed projects and formulate a proposal that will create the most value for CVE CVF has a 21% corporate tax rate and a required rate of return of 12%. 1. Your Case Study should begin with an Executive Summary on page 1 (1 paragraph). The Executive Summary should highlight your recommendations for this project. It should not be a summary of what you were asked to do. You will need to complete this project to be able to write this summary 2. Page 2 should show a summary of the investments you are recommending. Make sure that the total investment you are recommending is within the firm's budget TO 3. Your first task is to calculate the CFFA, CFS and CFC, the Internal Growth Rate, the Sustainable Growth Rate and the dividend payout ratio for CVF based on the latest financial statements available. Considering Claravale's growth strategy, address whether an internal growth or sustainable growth strategy is a viable option for CVF at this time. Grave Income Salomert nos of 2018 Sales $11.2015 des Doprostion Gross income SCAA Other perses MT More Income Tax 2015 7657 7619 211 3.371 3.413 3.000 3154 25 144 23 85 18 2016 2018 2535 $ Garavale Balance Sheet linos of Cash ST Investments murts Peale Inventory Bildings and Studies Machinery and foment 291 993 2670 Hangible Auto 679 679 Totes be NP home Tax Pay Other Guest Uit ST Det LTD Se 15 370 Equity Commons Adi Pidin Capital Poredings 37 531 1056 15 1730 Liabilities and ES 4. Review and analyze each proposed investment, using both NPV and IRR capital budgeting methods. Show your work: use Excel to set up your cash flow tables and run your NPVs/IRRs. Use the "Copy/paste special", "insert Excel object" commands to insert your Excel work into your Word document 5. Based on your analysis, prepare a capital expenditure plan of action for the CVF management team (conclusion of your work) 6. Discuss the External Financing Needed and/or increase in equity needed. Recommend an optimal capital structure for Claravale (debt versus equity financing) and explain your reasoning 7. Choose 1 project and perform a scenario analysis. Then focus on just one variable for the same project and perform a sensitivity analysis. Analyze your findings and address potential concerns for CVF to take into consideration. 8. There is no page limit to your paper, but remember that you are writing a business paper: it should be succinct and avoid waffle at all costs. Your paper should be properly organized, professionally written (proper grammar, correct spelling), with a logical flow of analysis. Be sure to cite your sources if needed. Claravale Farm, Inc. (CVF) is a legacy dairy farm located in Illinois. It started out as a small farm in the late 1800s and is now being run by the family's fourth generation. Through various consolidations of surrounding farms, CVF has become a large dairy farm with 4,000 cows, black and white Holsteins, fawn-colored jerseys, along with mottled crossbreeds of the two. The Claravale family takes a lot of pride in their farm and cares for their animals greatly. CVF is currently relying on equipment and aging technology that has been partly acquired via farm consolidations over the years. The CVF's CEO, Scott Claravale, has decided that it was time for the farm to rely more on available technology and to update some of the equipment used on the farm. Based on his knowledge of the milk industry in Illinois, the CEO has determined that he needs to grow CVF to $15 million in annual sales in order to be able to compete with the top 10 farms. He does not want to add cows to his farm at this point, and he is acutely aware that CVF cannot grow and remain profitable if he does not authorize some capital spending. Scott Claravale is willing to consider approving around $10 million in capital spending. He has not yet decided how the capital expenditures will be funded, but he understands that a combination of external financing and additional paid-in capital may be needed. Scott Claravale has asked his executive team to research and propose capital expenditure projects that would significantly improve their respective department as well as create the most value for the dairy farm. His executive team consists of: Ryan Claravale, Operating Officer Justin Claravale, Livestock Feeding Manager Chris Cornwall, Milking and Storing Manager Janet Ulrich, Pasture Manager Adbul Ben-Abbes, Herd Health and Reproduction Manager After many strategic meetings, the following projects were identified as making the most sense for CVF to invest in. Your services have been retained to conduct an analysis of the proposed projects and formulate a proposal that will create the most value for CVE CVF has a 21% corporate tax rate and a required rate of return of 12%. 1. Your Case Study should begin with an Executive Summary on page 1 (1 paragraph). The Executive Summary should highlight your recommendations for this project. It should not be a summary of what you were asked to do. You will need to complete this project to be able to write this summary 2. Page 2 should show a summary of the investments you are recommending. Make sure that the total investment you are recommending is within the firm's budget TO 3. Your first task is to calculate the CFFA, CFS and CFC, the Internal Growth Rate, the Sustainable Growth Rate and the dividend payout ratio for CVF based on the latest financial statements available. Considering Claravale's growth strategy, address whether an internal growth or sustainable growth strategy is a viable option for CVF at this time. Grave Income Salomert nos of 2018 Sales $11.2015 des Doprostion Gross income SCAA Other perses MT More Income Tax 2015 7657 7619 211 3.371 3.413 3.000 3154 25 144 23 85 18 2016 2018 2535 $ Garavale Balance Sheet linos of Cash ST Investments murts Peale Inventory Bildings and Studies Machinery and foment 291 993 2670 Hangible Auto 679 679 Totes be NP home Tax Pay Other Guest Uit ST Det LTD Se 15 370 Equity Commons Adi Pidin Capital Poredings 37 531 1056 15 1730 Liabilities and ES 4. Review and analyze each proposed investment, using both NPV and IRR capital budgeting methods. Show your work: use Excel to set up your cash flow tables and run your NPVs/IRRs. Use the "Copy/paste special", "insert Excel object" commands to insert your Excel work into your Word document 5. Based on your analysis, prepare a capital expenditure plan of action for the CVF management team (conclusion of your work) 6. Discuss the External Financing Needed and/or increase in equity needed. Recommend an optimal capital structure for Claravale (debt versus equity financing) and explain your reasoning 7. Choose 1 project and perform a scenario analysis. Then focus on just one variable for the same project and perform a sensitivity analysis. Analyze your findings and address potential concerns for CVF to take into consideration. 8. There is no page limit to your paper, but remember that you are writing a business paper: it should be succinct and avoid waffle at all costs. Your paper should be properly organized, professionally written (proper grammar, correct spelling), with a logical flow of analysis. Be sure to cite your sources if needed