I need help ASAP PLEASE on this case study, Ive submitted and paid a few times for it, please help! I attached the case it is OT Snack Company Valuation.

Questions are in the case study but I listed a brief version of them below! Please look at the originial when answering!

Questions:

1.What should Fussell pay to buy the firm?

2.How should he pay for the firm?

3.If he buys should he automate?

4.What is the dollar break even point?

5.Assuming average rate of inflation of 7% between 1987 and 1993, what was the actual sales decline in constant dollars?

6.With answers given above, would you advice Fussell to buy OT Snacks? Why or Why not?

Thank you!!

INTRODUCTION James fussell has just been laid off from his job which is 2 time in last three years, every time he is removed from his job th company by some other company. This time James is not only searching a job but is also looking out for a business which h him to buy this business of OT snack company. By reading the file of company james was not impressed and planned a visit establishment of OT snack compnay james realized the hidden potential of the business to succed. OT Snack co. was formed in year 1949 by Altom Bodenheimer & Grady Griffin, first the compnay sold honey bun in abuden honeybuns and opted out fried as its basic product. The main clients of compnay is vending machine companies and distrib lunch counter trade. By the end of 1993 OT Snack company had 52 people & produced 400,000 to 500,000 pies. The produ various flavours, the pie's sold by company is filled with apple, cherry, peach, raisins and chocolate & lemon. Currently production takes place in 4 steps which are as follows:Step 1: Pie filling was cooked and cooled. Step 2: Dough was prepared and cut into sections Step 3: Pies were deep fried for 3 min Step 4: Pie is wrapped in a glassine wrapper and place into a tray for shipping. Since years the employees turnover has been lower and so is the production efficiency, due to poor production efficiency s the workers are on piece work but there is habbit of staying at work and on the payroll even when there is no work or low Owner of OT Snack compnay Altom Bodenheimer is planning to retire soon and therefore he is allowing the business to de made over past few years not even a sing pie of OT is being sold on local grossery shop. As Bodenheimer is not serious for t looks to have been declining but as per the analysis of james there is huge potential in the busines to succeed. As Bodenhe the business, the current production capacity of the bakery is 12,000 dozen pies per week and each pie is being sold at the $1.2 million to sell its business which has $450,000 of cash and marketable securities and total assets appraised at $297,00 James is evaluating the offere of Bodenheimer, if James will accept its offer he has two choice one is to continue with old e introduce a new automated line of processes which can help in increasing the capaicty of facility to 24,000 dozen a week in The toal cost of initial equipment required is $497,000, in order to install new machine compnay also has to take a building $20,000 and a lease rent of $8,000 per month. NTRODUCTION e years, every time he is removed from his job the reason is almost same i.e. takeover of the job but is also looking out for a business which he can own. Mean while a brooker suggested any james was not impressed and planned a visit to the factory, after reaching to the f the business to succed. ffin, first the compnay sold honey bun in abudence but in year 1977 company discountiued mpnay is vending machine companies and distributors which sell these pie's as desert to the e & produced 400,000 to 500,000 pies. The product has all potential to grow and is availabe in ch, raisins and chocolate & lemon. on efficiency, due to poor production efficiency sales has been declining since 1987. Althoug all n the payroll even when there is no work or low work. n and therefore he is allowing the business to decline. No addition to customer base has been rossery shop. As Bodenheimer is not serious for the upliftment of the business the business e potential in the busines to succeed. As Bodenheimer is about to retire he is planning to sell n pies per week and each pie is being sold at the price of $2.7 a dozen. Bodenheimer is asking e securities and total assets appraised at $297,000. r he has two choice one is to continue with old equipments and technology and another is to the capaicty of facility to 24,000 dozen a week in place of 12,000 dozen pies a week earlier. new machine compnay also has to take a building on lease which for which it has to deposit 1) Computation of amount of money that James Fussell would be willing to pay for OT Snack Company:- Alton Bodenheimer has asked James Fussell to pay a total of $1.2 million for the company but James is individually analyzin Cash and marketable securities = $450,000 Value of properties appraiese by individual appraiser = $297,000 Present value of Future cash flows is as follows:In order to determine Present value of future cash flows we have to take few assumptions which are as follows, 1) We have assumed that the growth rate of the business is (g) 4% 2) WACC of the firm is 12%. Thus the present value of future incomes would be as follows:Present value = Total earnings after tax/(WACC-g) To determine the total earnings after tax we have to use projected financial statements prepared by James. Following are t 1) There are 50% chances that the total revenue would be $2,756,000 and $1,200,000. Thus the estimated total income would be = ($66,673*0.5)+($397,785*0.5) Thus the estimated total income would be = $232,229 Present value of future cash flows = $232,229/(12%-4%) Present value of future cash flows = $2,902,863 Thus total value of business would be = $450,000 + $$297,000 + $2,902,863 Thus total value of business would be = $3,649,863 As we can see that the intrinsic value is more than the price offered by Alton Bodenheimer therefore james must buy OT Sn mes is individually analyzing the takeover on the following lines, are as follows, by James. Following are the assumption which we will take to determine the present value of future cash flows, ore james must buy OT Snack company 3. Computation of NPV of automation option:- Due to automation the capacity of production will increase to 24,000 dozen per week as compared to current capacity of 1 The total number of employees will be reduced by almost 65%. The cost of all equipments to be purchased and installed would be $497,000 Economic life would be estimated to be equal to depreciable life which we have assumed as 15 years Annual lease expesnes of building to be used for production process would be = $75,000 NPV analysis:Projected data Total revenue Less: Direct expenses Cost of goods sold Direct labor FICA NCUC Taxes Utilities Sick pay Employee benefits Laundry Repairs and maintenance Sanitation Depreciation Property taxes 1200000 $ $ $ $ $ $ $ $ $ $ $ $ 438,600 142,500 10,189 428 20,040 3,400 21,375 3,000 3,600 1,800 73,000 14,300 $ 467,768 $ $ $ $ $ $ $ $ $ $ $ 62,000 4,433 10,000 3,000 75,000 23,720 71,500 4,000 9,300 96,000 - Income before taxes Less: Taxes Federal State $ 108,815 Inocme after taxes $ Gross profit Sales administration Salaries FICA Professional fees Travel Rent Insurance Management Fees Telephone Employee Benefits Equipment lease Building lease 35896 6546 66,373 Net Present value of project = P.V of future cash flows - Initial cost Net Present value of project = (Annual income after automation + Depreciation expense)* Present value annuity factor @1 Net Present value of project = (560442.92+106133)*6.81 - $497,000 Net Present value of project = $4,042,382 NPV of the automation option is positive and it means that it must be acccepted . IRR of the project would be as follows:At correct IRR, NPV of the project is 0 Let IRR of the Project NPV @120% 120% (Annual cash flow*Present value annuity factor@120%,15 year) 666575.9*0.833-497000 $58,257 Let IRR of the Project NPV @140% 140% (Annual cash flow*Present value annuity factor@22%,6 year) - In 666575.9*0.714-497000 -21,064 Computaion of IRR:NPV @120% NPV @140% IRR 58257 -21064 120%+(20%/(58257-(-21064))*58257) 135.00% Company should invest in this scheme as it is offering return of 135% which is more than minimum required rate of return s compared to current capacity of 12,000 dozen per week capacity. ed as 15 years Projected using automated actions 3369600 $ $ $ $ $ $ $ $ $ $ $ $ 1,231,588 49,875 28,611 1,202 56,272 1,190 7,481 8,424 10,109 5,054 106,133 14,300 $ 1,849,360 $ $ $ $ $ $ $ $ $ $ $ 21,700 12,448 28,080 8,424 210,600 66,606 200,772 11,232 26,114 269,568 75,000 $ 918,816 $ $ 303,100.04 55,273.37 $ 560,442.92 e)* Present value annuity factor @12%,15 years - Initial cost ue annuity factor@120%,15 year) - Initial investment cost ue annuity factor@22%,6 year) - Initial investment cost n minimum required rate of return i.e. WACC