This project is work a lot of points, it requires good knowlege in finance
I need it in 35 hours, 10 pages of case analysis has to be done
Deadline is Friday Evening 18:00 PST
See attachments befoe bidding kindly.
BUILD A FACTORY IN THE UNITED STATES: COST, €55MFor years, CCR has wrestled with the question of whether it makes sense not to make chocolate inthe US. After all, this is the company’s second-largest market outside of France, and has been fordecades.If only it were that simple. The Benoit family has resisted the urge to make this move for goodreasons. First, if CCR brings capacity to the US, the only way that will not affect the manufacturingplant in Brittany is if demand in the US rises to meet the new capacityWould CCR be willing to reduce capacity back home? Would CCR be able to find or develop aworkforce with the necessary skills? Would cultural barriers between management and Americanworkers prove difficult? And would US consumers be as enthusiastic about CCR’s products if theywere made in Wisconsin instead of imported from France?Those are the risks. John Hsu believes that the opportunities are also compelling. A new plant wouldalmost certainly offer efficiencies, including green architecture and production methods, that wouldmake production more efficient than what CCR has in France, with the added bonus of favorablepress coverage on what CCR imagines as a “green chocolate” ad campaign upon the opening of theUS plant. And a new plant in the US might offer an opportunity to create new lines of chocolatetailored to the American market.Hsu has proposed a €55 million factory to be built in the US. Arnaud considers this project to be ahigh-risk proposition. As a result, this project has a relatively high estimated WACC of 10%.Furthermore, according to a report by the French Ministry for the Economy, Industry, andEmployment, the US plant would decrease output and subsequent cash flows of the French plant by11.5% each year, once the plant is fully operational in Year 4. (There would be no cannibalization inYears 0-3.) For example, if they build in the US, the expected Year 4 cash flow for the French plantwould be 77.99 instead of 88.12 (see Table 1), the expected Year 5 cash flow would be 81.89, not92.53, and so on. Note that this reduction only affects the existing cash flows and not those from theBrittany capacity expansion (Project 3 below)
Chocolat Cordon Rouge
Corporate Finance
You are part of Marcel Arnaud’s team to analyze the 7 different projects under
consideration.
The table in the case describes the expected cash flows of the different projects. All
the costs and benefits of the projects have been taken into consideration except for
two potential costs:
1. John Hsu, the manager sponsoring the project to build a factory in the U.S.,
did not include the loss in output of the French plant in Years 4-10. He claims
that those cash flows are not part of his proposed project and as such should
not be included.
2. Bertrand Godard, who is proposing to expand capacity in Brittany, has not
included the cost of the land because he claims that the firm already owns it.
However, you should note that the cash flows of the project include the sale
of the land in year 10.
Before conducting your analysis, think about whether these decisions are correct
and, if not, adjust the cash flows accordingly.
Clarifications:
• The case gives you the WACC of each project. This is just the discount rate. As the case indicates, CCR has only €75M in its bank account to pay for the projects
investment costs.
Assignment Questions
1. Compute the NPV and IRR of each project. If there were no budget
constraint, which projects would you recommend?
2. Which projects would you recommend with the €75M budget? Assume first
that if CCR sells the land, it will NOT use the proceeds to increase its capita
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