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Given the following information, you are asked to make a recommendation to the CFO based on the findings. This will be used to make a
Given the following information, you are asked to make a recommendation to the CFO based on the findings. This will be used to make a suggestion to the company leadership on how Caffeine Blaster Beverage Company, Inc. should proceed with its expansion. In a 1-2 paragraph explanation identify the top suggestion and lowest suggestion and explain why you are making the recommendation, referencing calculations and what this data could mean for the future of your company and/or why this project should be eliminated. Data tables are below.
Expansion Project Title | Project Description and Details | Project Cost (Initial Investment) | First Year Cash Flow | Annual Growth Rate (5 years) | Expenses as a percentage of Revenues | Payback Period | NPV | IRR | |
Purchase of Snappal Beverage Company | This would be a total acquisition of Snappal Beverage Company. This company manufactures a line of ice teas of various flavors and has a reputation of using the best materials on Earth for making their drinks. It is an established company, with owners looking to retire. They are willing to provide part time consulting for up to one year to anyone who buys the company. | $25,000,000 | $8,500,000 | 8% | 28% | 2.93 | $16,636,151 | 27% | |
PolarBear | This company is based in Massachusetts and distributes their flavored seltzers nationally. While they have a large, loyal customer following, the company has exchanged hands multiple times. The current owners want out of the business, but it is uncertain as to why this is the case. The company is undervalued and the sale price reflects this. | $15,000,000 | $8,500,250 | 3.25% | 54% | 3.97 | $2,511,449 | 12% | |
Development of Coffee Line | Research and development has been asking that the company develop a line of coffees for several years. This initial project would launch several varieties: a regular, a regular decaf, and three flavors. It would require a large investment by the company to include facility space, equipment, staff, etc. The first year would be a building/launching year, so cash flow would be minimal. However, the growth rate would be huge. | $45,500,000 | $13,000,000 | 12% | 34% | 3.89 | $6,000,187 | 10% | |
Development of Straight Caffine | This project is another brain child of the research and development team. It extracts the caffine that is naturally found in coffee and concentrates it into a liquid, squirtable additive that can be used in any drink. R&D has been using variations of this liquid caffine to increase department productivity. Since it already exists, investment would be minimal. | $6,500,000 | $2,500,000 | 4% | 32% | 4.96 | $1,164,767 | 12% | |
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