Nowadays, we can see the huge disasters around the world that some of them are natural disasters such as earthquake, tsunami and so on and others are artificial ones for instance, financial crisis, energy crisis, revolution and so on.
When we are faced the problem or the case the following should be our reaction:
1) If the case or the problem is related to our life directly, we should assume that it is a case of another person and we are a consultant to solve her/his problem.
2) If the case is related to other people, we should consider that it is our problem directly and proceed to solve this case.
When we receive a case or problem, we should mush pit into the pool and only utilize from references and other people experiences focused on case. It means that we do not need read all of pages of book to analysis the case. At the first, we should consider that we are the leader of the world and we are able to solve each problem. Therefore, we do not need to be a skilled person on a special field such as finance, Economic, Physics, Mathematics or engineering and so on. I think that It is actual concept of MBA course.
In the case of Euroland Foods, we face to the constriction of capital spending (initial investment) equal Euro 120 million for 11 projects. How can we cope with this investment?
Which projects should be chosen?
My analysis is based on two categories as follows:
1) Quantitative Analysis (Internal Analysis)
I used from Capital Budgeting Techniques below cited:
I consider IRR as independent variable, NPV at minimum ROR and Equivalent Annuity as functions (just like Polynomials function in Math) for each 10 projects because project 6 (Effluent – water treatment at four plants) definitely should be done.
According to this analysis I found the location of abruptions and ranked projects by higher IRR.
- Profitability Index
It can be calculated by using of WACC (10.6%) and free cash flows.
- Reinvestment Rate Comparisons...