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Euroland Foods S.A. Group 1 Case 3 Kyle Abrahamovich Kristen Campagna Joe Coccia Molly Hawthorne Euroland Foods S.A. Headquartered in Belgium, Euroland Foods was a multinational producer that was founded in 1924. Its products, which included fruit juices, high quality ice cream, yogurt, and bottled water, were sold throughout northern France, Luxembourg, western Germany, the Netherlands, Britain, Belgium and Scandinavia. By 2000, sales for Euroland Foods had increased to nearly €1.6 billion. At its early January 2001 meeting, senior management for Euroland Foods encountered a problem. In determining the firm’s capital budget for the upcoming year, major projects under consideration totaled €316 million. The problem arose as a result of the €120 million limit that the Board of Directors had imposed for capital projects. This aforementioned €196 million difference challenged the senior managers of Euroland Foods to allocate the limited resources across the potential projects. The range of projects included new product introduction, acquisition, market expansion, efficiency improvements, preventative maintenance, and safety and pollution control. As part of Euroland Foods’ operational policies introduced in 1999 every investment proposal was subject to two financial hurdles, payback and internal rate of return. The following chart illustrates the hurdles established by Euroland Foods relevant to the type of project: Type of Project_____________ Min Acceptable IRR____Max. Acceptable Payback Yrs New product or new market 12% 6 Product or Market Extension 10% 5 Efficiency Improvements 8% 4 Safety or Environmental No test No test We have thus decided to rank the ten projects based on their Net Present Value (NPV). The NPV values can be found in the case. The results of the rankings are in the table below. Once we have ranked by NPV, we then ranked the projects by Profitability Index (PI) so that any projects that were “on the bubble” could be chosen based on their ranking of profitability index.
Approximate Word count = 1103
Approximate Pages = 4.4
(250 words per page double spaced)
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