财务管理案例分析-英文版

1、LAURENTIAN BAKERIESThe decision-maker must make a recommendation on a large expansion project. Discounted cash flow analysis is required.In latee May, 19955, Danniellee Knowwles, vice-presiident of opperatiions ffor Laaurenttian BBakeriies Innc., wwas prrepariing a capittal exxpendiiture propoosal t

2、to exppand tthe coompanyys frrozen pizzaa plannt in Winniipeg Manittoba. If thhe oppportunnity tto exppand iinto tthe U.S. frrozen pizzaa markket waas takken, tthe coompanyy woulld neeed exttra caapacitty. A detaiiled aanalyssis, iincludding aa net preseent vaalue ccalcullationn, wass requuired by t

3、hhe commpanys Cappital Alloccationn Poliicy foor alll capiital eexpendditurees in orderr to eensuree thatt projjects were both profiitablee and consiistentt withh corpporatee straategiees.COMPANYY BACKKGROUHHDEstabliished in 19984, LLaurenntian Bakerries IInc. (Laureentiann) mannufacttured a varriet

4、y of frrozen bakedd foodd prodducts at pllants in Wiinnipeeg (piizzas), Torronto (cakees) annd Monntreall (piees). WWhile each plantt operrated as a profiit cennter, they shareed a ccommonn salees forrce loocatedd at tthe coompanyy heaad offfice iin Monntreall. Altthoughh the Toronnto pllant wwas re

5、esponssible for oover 440% off corpporatee reveenues in fiiscal 1994, and the oother plantts wass accoountedd for aboutt 30% each, all threee diviisionss conttributted eqquallyy to pprofitts. Thhe commpany enjoyyed sttrong compeetitivve possitionns in all tthree markeets annd it was tthe loow cosst

6、prooducerr in tthe piizza mmarkett. Inccome SStatemments and BBalancce Sheeets ffor thhe 19993 to 1995 fiscaal yeaars arre in Exhibbits 11 and 2, reespecttivelyy.Laurenttian ssold mmost oof itss prodducts to laarge ggrocerry chaains, and iin facct, suupplyiing seeverall Canaadian chainns witth priiv

7、ate labell brannd pizzzas ggeneraated mmuch oof thee salees groowth. Otherr salees werre madde to instiitutioonal ffood sservicces.The commpanys succcess was, in paart, tthe prroductt of iits maanagemmentss phillosophhies. The ccornerrstonee of LLaurenntians opeeratioons waas itss inclludingg a coom

8、mitmment tto a bbusineess sttrateggy proomotinng conntinuoous immproveement; for exampple alll empployeees werre emppowereed to thinkk abouut andd makee sugggestioons foor wayys of reduccing wwaste. As DDaniellle Knnowless saw it: “CContinnuous improovemennt is a wayy of llife aat Lauuremtiian.” Als

9、o, the compaany waas knoown foor itss abovve aaveragge connsiderrationn for the hhuman resouurce aand ennvironnmentaal imppact oof itss busiiness decissions. Thesse phiilosopphies drovee all policcy-makking, incluuding thosee poliicies goverrning capittal alllocattion.Daniellle KnoowlesDaniellle Kno

10、owless carreer, whichh spannned 113 yeaars inn the food indusstry, had iincludded poositioons inn otheer funnctionnal arreas ssuch aas marrketinng andd finaance. She hhad reeceiveed an underrgraduuate ddegreee in mmechannical enginneerinng froom Queeens Univeersityy in KKingstton, Ontaario, and aa m

11、astter off busiiness adminnistraation from the WWesterrn Businness Schoool.THE PIZZZA INNDUSTRRYMajor ssegmennts inn the pizzaa markket weere frrozen pizzaa, delli-freesh chhilledd pizzza, reestaurrant ppizza and ttake-oout piizza. Of thhese ffour, restaaurantt and take-out wwere tthe laargestt. Whi

12、ile thhese ssegmennts coonsistted off thouusandss of ssmall-ownedd estaablishhmentss, a ffew laarge NNorth Ameriican cchainss, whiich inncludeed Domminoss, Pizzza Huut andd Litttle Caaesars, doominatted.Althouggh 12 firmss manuufactuured ffrozenn pizzzas inn Canaada, tthe fiive laargestt firmms, inn

13、cludiing Laaurenttian, accouunted for 995% off prodductioon. MccCain Foodss was the mmarkett leadder wiith 444% marrket sshare, whille Lauurentiian haad 21%. Perr capiita coonsumpption of frrozen produucts iin Cannada wwas onne-thiird off the levell in UU.S. wwhere retaiil priices wwere llower.ECONO

14、MIIC CONNDITIOONSThe Norrth Ammericaan ecoonomy had eenjoyeed strrong ggrowthh sincce 19993, affter hhavingg sufffered a sevvere rrecesssion ffor thhe twoo prevvious yearss. Intterestt ratees botttomedd-out in miid-19994, affter wwhich the UU.S. FFederaal Resserve slowlly inccreaseed rattes unntil e

15、early 1995 in ann atteempt tto figght innflatiionaryy presssuress. Nevvertheeless, Nortth Ameericann infllationn was expeccted tto aveerage 3% too 5%annnuallly forr the foresseeablle futture. The BBank oof Cannada ffollowwed thhe U.SS. Fedderal Reserrves lead and iincreaased iintereest raates, in pa

16、art too prottect tthe Caanadiaan dolllarss valuue rellativee to tthe vaalue oof thee U.S. dolllar. TThe reesult was aa Nortth Ameericann growwth raate off grosss dommesticc prodduct tthat wwas shhowingg signns of slowiing doown.LAURRENNTIANS PROOJECT REVIEEW PROOCESSAll cappital projeects aat Lauure

17、ntiian weere suubjectt to rrevieww baseed on the ccompannys CCapitaal Alllocatiion Poolicy. The latesst pollicy, whichh had been develloped in 19989 whhen thhe commpany begann conssideriing faactorss otheer thaan simmply tthe caalculaated nnet prresentt valuue forr projject eevaluaation, was stricct

18、ly eenforcced annd mannagerss evalluatedd eachh yearr parttiallyy by ttheir divissionss retuurn onn inveestmennt. Thhe purrpose of thhe pollicy wwas too reinnforcee the managgementt phillosophhies bby achhievinng cerrtain objecctivess: thaat alll projjects be coonsisttent wwith bbusineess sttrateggi

19、es, suppoort coontinuuous iimprovvementt, connsiderr the humann resoource and eenviroonmenttal immpact, and proviide a suffiicientt retuurn onn inveestmennt.Prior tto thee apprroval of anny cappital alloccationn, eacch opeeratinng divvisionn was requiired tto devvelop both a Strrategiic andd an OOpe

20、ratting PPlan. The SStrateegic PPlan hhad too idenntify and qquantiify eiither ineffficienncies or loost oppportuunitiees andd estaablishh targgets ffor thheir eeliminnationn, incclude a thrree-yeear pllan off capiital rrequirrementts, liink caapitall spennding to buusinesss strrategiies annd connti

21、nuoous immproveement efforrt, annd achhieve the ccompanny-widde hurrdle rrates.The firrst yeear off the Strattegic Plan becamme thee Annuual Opperatiing Pllan. TThis wwas suupportted byy a deetaileed lisst of propoosed ccapitaal proojectss whicch beccame tthe baasis ffor caapitall alloocatioon. Inn

22、addiition to meeetingg all Strattegic Plan criteeria, the OOperatting PPlan hhad too idenntify majorr conttinuouus impprovemment iinitiaativess and budgeet forr the assocciatedd beneefits, as wwell aas devvelop a traainingg plann idenntifyiing sppecifiic traainingg objeectivees forr the year.These c

23、criterria weere ussed byy headd offiice too keepp the behavvior oof divvisionnal maanagerrs connsisteent wiith coorporaate obbjectiives. For eexamplle, thhe reqquiremment tto devvelop a traainingg plann as ppart oof thee operrationnal pllan foorced managgers tto be efficcient with emplooyee ttrainii

24、ng annd to keep contiinuouss imprrovemeent ass the ultimmate oobjecttive.All prooposedd projjects were submiitted on ann Authhorizaation for EExpenddituree (AFEE) Forrm forr reviiew annd appprovall (seee Exhiibit 33). Thhe AFEE had to prresentt the projeects linkaage too the businness sstrateegies.

25、In aadditiion, iit hadd to iincludde speecificc detaails oof ecoonomiccs andd engiineeriing, iinvolvvementt and empowwermennt, huuman rresourrce, aand thhe envvironmment. This requiiremennt enssured that projeects hhad beeen caarefullly thhoughtt throough bby forrcing managgers tto lisst thee itemms

26、 purrchaseed, thhe empployeees invvolvedd in tthe prrojectt, thee emplloyeess adveerselyy affeected by thhe prooject, and the eeffectt of tthe prrojectt on tthe ennvironnment.Approvaal of a cappital expennditurre prooposall was contiingentt on tthree requiiremennts whhich aare illlustrrated in Exxhi

27、bitt 4. TThe fiirst oof theese reequireementss was the ooperatting ddivisiions demonnstratted coommitmment tto conntinuoous immproveement (C.I.), thhe criiteriaa of wwhich are ddescriibed iin Exhhibit 5. Thhe seccond rrequirrementt was that all pprojeccts off moree thann $3000,000 be inncludeed in t

28、he SStrateegic PPlan. The ffinal requiiremennt wass thatt for projeects ggreateer thaan $1 milliion, tthe opperatiing diivisioon hadd to aachievve itss proffit taarget. Howeever, if a projeect faailed to meeet anny of thesee requuiremeents, theree was a mecchanissm thrrough whichh emerrgencyy fundds

29、 migght bee alloocatedd subjject tto thee corpporatee execcutivee commmitteees reeview and aapprovval. IIf thee projject wwas leess thhan $11 milllion aand itt met all tthree requiiremennts, oonly ddivisiional revieew andd apprroval was nnecesssary. Otherrwise, apprroval was nneededd fromm the execu

30、utive commiittee.The prooposedd Winnnipeg plantt projject wwas coonsideered aa classs 2 pprojecct as the eexpendditurees werre meaant too incrrease capaccity ffor exxistinng prooductss or tto esttablissh a ffaciliity foor neww prodducts. Capiital pprojeccts coould ffall iinto oone off threee othher

31、cllassess: cosst redductioon (Cllass 11); eqquipmeent orr faciility replaacemennt (Cllass 33); orr otheer neccessarry exppendittures for RR&D, pproducct impprovemments, quallity ccontrool andd conccurrennce wiith leegal, goverrnmentt, heaalth, safetty or insurrance requiiremennts inncludiing poollut

32、iion coontroll (Claass 4). A pprojecct speendingg audiit wass requuired for aall exxpendiituress; howwever, a saavingss audiit wass alsoo needded iff the projeect waas connsiderred eiither 1 or 2. Eaach cllass oof prooject had aa diffferentt hurddle raate reeflectting ddifferrent llevelss of rrisk.

33、Classs 1 prrojectts werre connsiderred thhe mosst rissky annd hadd a huurdle rate of 200%. Cllass 22 and Classs 3 prrojectts hadd hurddle raates oof 18% and 15%, respeectiveely.Knowless was respoonsiblle forr deveelopinng thee Winnnipeg divissionss Capiital PPlan aand coompletting aall AFFE forrms.W

34、INNIPEEG PLAANTS EXPANNSION OPTIOONSLaurenttian hhad maanufaccturedd frozzen piizzas at thhe Torronto plantt untiil 19992. Hooweverr, aftter thhe commpany becamme thee solee suppplier of prrivatee-labeel froozen ppizzass for a larrge grroceryy chaiin andd was forceed to securre addditionnal caapacit

35、ty, itt acquuired the WWinnippeg frrozen pizzaa plannt froom a ccompettitor. A prrogramm of rregulaar maiintenaance aand eqquipmeent reeplaceement made the nnew pllant tthe loow cosst prooducerr in tthe inndustrry, wiith ann operratingg marggin thhat avverageed 15%.The plaan, wiith itts prooven ccom

36、mittment to coontinuuous iimprovvementt, hadd succcessfuully mmet itts proofit oobjecttive ffor thhe passt thrree yeears. Afterr the shorttage oof cappacityy had been identtifiedd as tthe pllantss larggest ssourcee of llost oopporttunityy, mannagemeent waas eagger too recttify tthis pprobleem as tar

37、geeted ffor inn the Strattegic Plan. Becaause tthe faacilitty hadd alsoo inclluded the ppropossed pllant eexpanssion iin itss Straategicc Plann, it met aall thhree rrequirrementts forr conssideraation of appprovaal forr a caapitall projject.Annual saless had matchhed pllant ccapaciity off 10.99 mill

38、lion ffrozenn pizzzas whhen Laauentiian cooncludded thhat oppportuunitiees simmilar to thhose iin Cannada eexisteed in the UU.S. AAn oppportunnity ssurfacced whherebyy Laurrentiaan couuld haave ann excllusivee arraangemeent too suppply a largee U.S.-baseed groocery chainn withh its privaate-laabel-b

39、brand frozeen pizzzas bbeginnning iin Aprril, 11996. As a resullt of this arranngemennt, frrozen pizzaa salees wouuld inncreasse rappidly, addiing 2.2 milllion unitss in ffiscall 19966, anoother 1.8 mmillioon uniits inn fisccal 19997, aand thhen 1.3 milllion addittionall unitts to reachh a tootal oo

40、f 5.33 milllion aadditiional unitss by ffiscall 19988. Howwever, the termss of tthe aggreemeent woould oonly pprovidde Lauurentiian wiith guuarantteed ssales of haalf thhis ammount. Knowwles eexpectted thhat thhere wwas a 50% cchancee thatt the groceery chhain wwould orderr onlyy the guaraanteedd am

41、ouunt. LLaurenntian sold frozeen pizzzas tto itss custtomerss for $1.7 in 19995 annd priices wwere eexpectted too incrrease just enouggh to keep pace with inflaation. Prodductioon cossts weere exxpecteed to increease aat a ssimilaar ratte.Laurenttian hhad coonsideered, but rrejectted, tthree otherr

42、alteernatiives tto inccreasee its frozeen pizzza caapacitty. Fiirst, the aacquissitionn of aa comppetitoors ffaciliity inn Canaada haad beeen rejjectedd becaause tthe eqquipmeent woould nnot saatisfyy the immeddiate capaccity nneeds nor aachievve thee costt reduuctionn posssible with expannsion of t

43、hhe Winnnipegg plannt. Seecond, the acquiisitioon of a commpetittor inn the U.S. hhad beeen reejecteed beccause the aavailaable pplant wouldd requuire aa capiital iinfusiion doouble that requiired iin Winnnipegg. As well, therre werre rissks thhat thhe prooduct qualiity woould bbe infferiorr. Lasst,

44、 thhe exppansioon of the TTorontto cakke plaant haad beeen rejjectedd as iit wouuld reequiree a caapitall outllay siimilarr to tthat iin thee secoond allternaative. The only remaiining alterrnativve wass the expannsion of thhe Winnnipegg plannt. Byy keepping tthe frrozen pizzaa in WWinnippeg, LLaure

45、nntian couldd bettter exxploitt econnomiess of sscale and aassuree conssistenntly hhigh pproducct quaality.The Prooposall The exppansioon prooposall, whiich woould rrequirre sixx montths too compplete, woulld reccommennd fouur maiin exppendittures: expaandingg the existting bbuildiing inn Winnnipeg

46、by 600% wouuld coost $11.3 miillionn; addding aa spirral frreezerr, $1.6 milllion; insttallinng a nnew hiigh sppeed ppizza proceessingg linee, $1.3 milllion; and acquiiring addittionall wareehousee spacce, $6600,0000. Inncludiing $4400,0000 forr conttingenncy neeeds, the ttotal cash outlaay forr the

47、 projeect woould bbe $5.2 milllion. The equippment was eexpectted too be uusefull for 10 yeears, at whhich ppoint its ssalvagge vallue woould bbe zerro.The lannd on whichh the Winniipeg pplant was bbuilt valueed at 250,0000 annd no addittionall landd woulld be necesssary for tthe prrojectt. Whiile t

48、hhe exppansioon wouuld noot reqquire Laureentiann to iincreaase thhe sizze of the pplants admministtrativve staaff, KKnowlees wonnderedd whatt porttion, if anny, off the $223,000 iin fixxed saalariees shoould bbe inccludedd whenn evalluatinng thee projject. Likewwise, she eestimaated tthat iit cosst

49、 Lauurentiian appproxiimatelly $400,000 in saales sstaff time and eexpansses too secuure thhe U.SS. conntractt thatt had creatted thhe neeed forr extrra cappacityy. Lasst, neet worrking capittal neeeds wwould increease wwith aadditiional saless. Worrking capittal waas thee sum of innventoory annd ac

50、ccountss receeivablle lesss acccountss payaable, all oof whiich weere a functtion oof salles. KKnowlees esttimateed, hooweverr, thaat thee new high-speedd linee woulld alllow thhe commpany to cuut twoo dayss fromm averrage iinventtory aage.Added tto thee beneefit dderiveed froom inccreaseed salles,

51、tthe prrojectt woulld redduce pproducction costss in ttwo waays. FFirst, the new hhigh-sspeed line wouldd reduuce pllant-wwide uunit ccost bby $0.009, thouggh onlly 70% of tthis iincreaased eefficiiency wouldd be rrealizzed inn the firstt yearr. Theere waas an equall channce, hhoweveer, thhat onnly

52、500% of thesee saviings ccould actuaally bbe achhievedd. Seccond, “otheer” saavingss totaaling $138,000 pper yeear woould aalso rresultt fromm the new lline aand woould iincreaase eaach yeear att the rate of innflatiion.Each yeear, aa capiital ccost aallowaance (CCA), akinn to ddeprecciatioon, wooul

53、d bbe dedductedd fromm operratingg incoome ass a reesult of thhe cappital expennditurre. Thhis deeductiion, iin turrn, woould rreducee the amounnt of corpoorate tax ppaid bby Lauurentiian. IIn thee evennt thaat thee comppany ddid noot havve possitivee earnnings in anny yeaar, thhe CCAA deduuctionn c

54、oulld be transsferreed to a subbsequeent yeear. HHoweveer, coorporaate eaarninggs werre proojecteed to be poositivve forr the foresseeablle futture. Knowlles coompileed thee eliggible CCA ddeducttion ffor 100 yearrs (seee Exhhibit 6). FFor thhe purrpose of heer anaalysiss, shee assuumed tthat aall c

55、aash fllows wwould occurr at tthe appproprriate year-end.Three aareas of ennvironnmentaal conncern had tto be addreessed in thhe prooposall to eensuree bothh confformitty witth Lauurentiian poolicy and ccompliiance with regullatoryy bodiies annd loccal byy-lawss. Firrst, ddesignn and instaallatiion

56、off saniitary drainn systtems, incluuding re-rooutingg of eexistiing drrains, woulld impprove sanittationn praccticess of eefflueent/waastewaater ddischaarge. Seconnd, thhe proovisioon of waterr-floww recoordingg meteers woould qquantiify waater vvolumees connsumedd in mmanufaacturiing annd hellp to

57、 reducce itss usagge. Laast, tthe reefrigeeratioon plaant woould uuse ammmoniaa as tthe cooolantt as oopposeed to chlorro-fluuro-caarbonss. Theese innitiattives were consiideredd suffficiennt to satissfy thhe criiteriaa of tthe Caapitall Alloocatioon Pollicy.THE DECCISIONNKnowless beliieved that the

58、 pprojecct wass conssistennt witth thee comppanyss busiiness strattegy ssince it woould eensuree thatt the Winniipeg pplant contiinued to bee the low ccost pproduccer off frozzen piizzas in Caanada. Howeever, she kknew tthat hher annalysiis musst connsiderr all factoors, iincludding tthe prrojectts

59、neet preesent valuee. Thee plannts ccapitaal alllocatiion reeview commiittee wouldd be ffollowwing tthe prroceduures sset ouut in the ccompannys CCapitaal Alllocatiion Poolicy as thhe bassis foor revviewinng herr recoommenddationn.Knowless conssidereed thee impllicatiions iif thee projject ddid noot

60、 proovide suffiicientt beneefit tto covver thhe Claass 2 hurdlle ratte of 18%. Enterring tthe U.S. grroceryy chaiins maarket was aa tremmendouus oppportunnity aand shhe connsiderred whhat otther bbusineess coould rresultt fromm Laurrentiaans iincreaased ppresennce. SShe allso woondereed if the hhurd