The company has relied heavily on debt financing so far, and with the current debt to equity ratio of 125% the company’s bank has urged the company to focus on debt reduction. The company’s price to earning ration is 8, and its shares are priced much below its peer companies. Venus Asset Management, an asset management company based in London, has in fact taken advantage of their current lower price shares and accumulated the company’s shares expecting a turn around.
This poses a serious threat to the company of an hostile takeover. Since the price-war amongst the competitive company has finished, the company is focusing on increasing sales and profit margin, as well as debt reduction. The company is at a fix since it can’t cut the dividends, or sell more shares at the current inferior price to generate finance as it will affect the company’s reputation in the market. Hence the board has voted a cap of 80 million Euros on next year’s spending.
This budget will be prepared by a team of seven members. The team members are from production distribution, sales, marketing, strategy, finance, and brand management field hence it’s a good diversity and blend of all the departments. The team has come up with the following eleven project proposals totaled over 208 million Euros, however due to limited spending budget, only some of them can be taken up by the company in the next year. 1. Expand truck Fleet 2. New Plant 3.
Expanded Plant 4. Artificial Sweetener 5. Automation and conveyer systems 6. Water treatment 7. Eastward expansion 8. Southward expansion 9. Snack Foods 10. Inventory control systems 11. Strategic Acquisition Each of the above projects has different IRR, payback period, risk and strategy involved. The project needs to be evaluated based on the various criteria keeping in mind the company’s current market and financial condition, as well as strategies and future aspirations.