Financial Management “The Super Project” Case Analysis December 3‚ 2008 Introduction and Problem Identification Mr. Crosby Sanberg is the Manager of Financial Analysis at General Food Corporation. General Foods is currently starting a new product line called Super‚ which a innovative instant dessert. To produce said product‚ General Food would use the existing Jell-O agglomerator in manufacturing and must purchase new machinery and equipment costing $120‚000 and perform building modifications
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The Super Project Case Study FIN 3717 Braden Eddy‚ Lauren Gear and Dakota Conravey The Super Project Case Study FIN 3717 Braden Eddy‚ Lauren Gear and Dakota Conravey Statement of Facts General Foods is a large corporation organized by product lines. They are evaluating Super Project‚ the manufacture of a new powdered dessert. Crosby Sanberg‚ a financial analysis manager‚ must determine the value in accepting the proposal‚ along with J.C. Kresslin‚ the Corporate Controller. The Super
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The Super Project – Summary Introduction In 1967‚ General Foods was considering to expand their portfolio with a new product called Super. Super was a dessert supposed to penetrate a dessert market in growth. The investment required $200K‚ $80K for building modifications and $120K for machinery and equipment. General Foods already had an agglomerator that could be used to manufacture Super. The $120K was meant to pay for packaging machinery. In order to decide whether to accept or decline this
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Executive Summary In the Super Project case‚ Crosby set out to argue that the current methodologies being utilized by General Foods Corporation to determine which capital investments to pursue did not always fit the bill. Crosby advocated using alternative methods for evaluation of Super including: 1) Incremental Basis‚ 2) Facilities Used Basis‚ and 3) Fully Allocated Basis. He provided the Corporate Budgets and Analysis management team with documentation that articulated each of the methods he
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The Super Project The Super Project case mainly deals with the efficiency of project tool analysis in capital budgeting process. The three techniques that General Foods management used to determine whether Super Project was a worthwhile project were: • Incremental basis • Facilities-used basis • Fully allocated facilities and costs basis The three techniques mentioned above will be discussed in more details in question 4 below. Questions: 1. What are the relevant cash flows for General Foods
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Super Project Case What are the relevant cash flows that General Foods should use in evaluating the Super Project? In particular‚ how should management deal with such issues as Test-market expenses? Overhead Expenses? Erosion of Jell-O contribution margin? Allocation of charges for the use of the excess agglomerator? The relevant cash flows that General Foods should use in evaluating the Super Project are considered Incremental cash flows and are “the changes in the firm’s cash flows
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The Super Project Introduction General Foods (GF) expects Super‚ a new powdered dessert‚ to capture 10% share of the total dessert market (2% coming from the erosion of Jell-O sales). The company’s Financial Analyst has issued a memo comparing three alternative techniques for project evaluations‚ illustrating the problems and limitations inherent in using ROFE (return on funds employed) and payback as evaluation methods. The disparate ROFE results obtained with these methods are due to differences
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The Super Project Flows: 1) Test Market Expenses: Do not Include it is a sunk cost and cannot be recovered if the project were not to become operational. 2) Overhead cost: The Super project will initially not require incremental overhead costs. However‚ if and when the project grows‚ incremental overhead expenses will be incurred specific to the project. This has to be captured in capital budgeting to accurately assess the project. Here we assume that the project will not require considerable
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Keisha M. Smith Bus 436 Due Date: 04/30/15 Super Project Analysis After carefully reviewing Super Project’s data‚ I’ve come to the conclusion that test market expenses and the allocation of charges for the use of the excess agglomerator capacity are not incremental because they are sunken costs that have already been accounted for. Whether Super is accepted or rejected‚ they will not affect the cash flows beyond current calculations. Overhead expenses is incremental because the expansion needed
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Birds Eye. Their customers are retail consumers. The Super Project presented General Foods management with the possibility to introduce a new dessert product‚ named Super‚ into the market. The dilemma management faced was how to appropriately measure and allocate costs associated with the project‚ as well as‚ whether to accept or reject the project based on costs and future cash flows generated by Super. With regard to The Super Project or any capital budgeting decision‚ time value of money concepts
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