This website uses cookies to ensure you have the best experience. Learn more

Super Project Essay

1248 words - 5 pages

The Super Project
Tobey

Overview
• Case Summary • Problem Statement • ROFE & Capital Budgeting • Incredible Incremental • Analysis Options • Cash Flows • Recommendations

Case Summary
• General Foods is a large corporation organized by Product Lines. • Super is a proposed new instant desert, based on a “flavored, water-soluble, agglomerated powder.” • General Foods has numerous projects with strict criteria to judge worthiness. • There are basically three types of Capital Investment proposals at General Foods: Safety, Quality, Increased Profit • Increased Profit: Cost Reduction, Capacity, New Product • Max 10 years payback: as low as 20% PBT • … if expected to be permanent product ...view middle of the document...

• Artificially biases long-term asset-intensive projects, as they have bigger apparent depreciation cash flows •Does not capture the time value of money; interest and inflation ROFE is not a tool to evaluate capital projects. Even used as a metric to compare capital earnings performance, has flaws.

Capital Budgeting
In Capital Budgeting you do not evaluate earnings, you evaluate cash flows. Why?
“You can’t spend out of earnings, you can’t eat out of earnings, and you can’t pay dividends out of earnings. You can do these things only out of cash flow.” - Ross, Westerfield, Jaffe To evaluate cash flows, we must account for the time-value of money: Discount future cash flows for interest and inflation. How?

NPV Which Cash Flows?
Capital Budgeting is specifically about Incremental Cash Flows “[Incremental cash flows are] the changes in the firm’s cash flows that occur as a direct consequence of accepting the project” - Ross, Westerfield, Jaffe

Decisions Decisions
•Capital budgeting decisions about Super contain externalities •Cost of the market study •Facilities used from the Jell-O project •SG&A overhead for GF corporate •Confusion about how to make these decisions •The GF Accounting and Financial Manual specifies, “capital project requests be prepared on an incremental basis.” •“What I learned about incremental analysis at the Business School doesn’t always work.” - Crosby Sanberg, GF •“Although the existing facilities utilized by Super are not incremental to this project, they are relevant.” - Crosby
Sanberg, GF

•If you add non-incremental items to Super, shouldn’t you balance the equation and account for changes to the Jell-O project? •Where do you draw the line? Should not be arbitrary. •To make good decisions, a well defined framework is required to reliably apply rules to decision making

Incredible Incrementals
Incremental Analysis
It is important to determine which cash flows are incremental and which are not because non-incremental cash flows are not relevant to the project. How do we know which cash flows are incremental cash flows? Incremental Cash Flow = total firm cash flow WITH the project total firm cash flow WITHOUT the project

Source: Professor Tim Thompson, Kellogg School of Management http://www.kellogg.northwestern.edu/faculty/thompsnt/htm/emp/Investment%20Evaluation%20Abridged.ppt

Incredible Incrementals
Examine cash flows decisions • • • • • • • • • Changes in net working capital Capital Expenditures for fixed assets Depreciation is not cash flow, but must be factored into taxation Ignore sunk costs Include effects of the project on the rest of the firm: erosion or enhancement Include Overhead costs Account for opportunity costs Recaptured working capital recovered after shutdown Net proceeds (after taxes) from salvage value due to the sale of capital assets after shutdown

Summary Option 1
“Incremental”...

Other Papers Like Super Project

Global and China Super-Concentrated Detergent Industry 2014 Market Research Report

1995 words - 8 pages listed Super-concentrated detergent upstream raw materials equipments and down stream clients survey analysis and Super-concentrated detergent marketing channels industry development trend and proposals. In the end, The report introduced Super-concentrated detergent new project SWOT analysis Investment feasibility analysis investment return analysis and also give related research conclusions and development trend analysis on Global and China

Nfl Superbowl Debacle Essay

1308 words - 6 pages in different places, 400 people had to give up their seats. Today, any kinds of institutions are increasingly utilizing benefits of project management, especially for the projects that involve hundreds of people. Therefore, it would not be wrong to say Super Bowl XLV was one of the events that could have benefited from project management. As known, project management starts with planning. It sets the goal of the project, emphasizes critical

Emotional Memory

919 words - 4 pages excellent filter, an excellent purifier of memories of emotions once experienced. Moreover, time is an excellent artist. It not only purifies but is capable of poeticizing the memories" 1, Can an actor use more than one emotion at the time to make the emotion needed on stage a more powerful emotion? Gr11/12 Drama VADA3M/4M-01 Due date: Wednesday, October 5th, 2011 Alejandra Arellano Day 1 Period 3 Ms. Bannon The Super-Objective and

Behavioral Aspects Of Project Management

2719 words - 11 pages Organizations are looking for ways to improve processes and products. To be successful in accomplishing quality improvement initiatives the organization must invest in skilled project manger that understand the influence of organizational behavior and culture. Organizational culture can influence the overall success of a project. Sometime a project manager might find it very difficult to align himself into the culture of the organization. Some

Erp Implementation At Bombardier

263 words - 2 pages earlier ERP project, a new project called BMIS was envisioned. Highlights of BMIS project: • Vision: Functional councils of Methods, quality, Work and material planning, procurement created for role and direction determination. • Team: Best employees from various functions along with BTS (Business transformation services) with an employee to consultant ratio of 10:1. • Implementation strategy: Progressive and phased approach, beginning with

Jannr

433 words - 2 pages Sheraton, christened ‘ITC One’, has been completed and is ready for opening shortly. The super deluxe project, ITC Grand Maratha, at Sahar, Mumbai is at an advanced stage of construction and is expected to open towards the end of this year. Construction of the second hotel near Upper Worli in Mumbai has already commenced, together with a housing project for managers. The construction of ITC Sonar Bangla at Calcutta is progressing satisfactorily. The

Recuycling

810 words - 4 pages ,... * Ginger Cultivation, Ginger Processing and Ginger Products * Glass, Flat Glass, Art Glass, Hollow Glass, Automotive G... * Health Care Projects * Herbs and Herbal Based Products, Ayurvedic Medicines, Cos... * Highly Demandable Medicinal Plants * Hospital, Specialized (Super Speciality) Hospitals, Healt... * Hotel and Hospitality Projects * Hygiene products * Identified Project Opportunities - Andhra Pradesh

Chapter 14 – Project Planning and Scheduling

1763 words - 8 pages saved exceed the benefits. They used a scheduling technique that involves shorting normal schedules through using additional resources or transferring resources from other activities. 50. Projects normally have a beginning and an end; they also have a set budget. What was the price of the Alton Super Bridge and how long did the contractors have to complete the project? Budget = $86 million Time to complete the project = 3yr and 5 months

Project Management Short Course

5043 words - 21 pages their opinion of how teams develop over time. 7. Get them to list 5 advantages and disadvantages of working on a team project in school. 8.     Ask them if the advantages outweigh the disadvantages.     LECTURE OUTLINE   1. Real-World Examples A. Vignette: A Super Team •         The project started in July 2000 with summer camp and

Pak Elektron Limited: Converting Sysems To Erp

281 words - 2 pages PAK ELEKTRON LIMITED: CONVERTING SYSEMS TO ERP Q: ERP projects are ecxpensive and risky. Why did PEL decide to embark on an ERP implementation project? Since the turn of 21st century, as the modern technology becomes enormously developed, there has been another development of IT-driven organizational transformation. Old legacy systems are gradually replaced by newly developed more enterprise-wide suites of integrated systems which is known

Suvarnabhumi Airport, Thailand

3687 words - 15 pages management to improve production, material properties and structural performance to satisfy service life and safety criteria. This issue of Structural Engineering International illustrates some outstanding structures in ASEAN countries covering planning, design, execution, operation and maintenance. Among 14 outstanding projects there are 8 bridges, 6 buildings and other types of structure. The structural systems for each project are quite

Related Essays

Super Project Essay

1216 words - 5 pages Gardner, Samantha Graham, Anders Laptev, Nikolay Tang, Lingli Zhong, Xiaoyin University Of California Santa Barbara Department of Economics Analysis of Super Project Case Quandaries of incremental analysis Quick Overview In 1966-67, General Foods Corporation was considering introducing a new product called Super, “a new instant dessert based on a flavored, water-soluble, agglomerated powder,” to U.S. and foreign markets. The proposed

Case Analysis Super Project

632 words - 3 pages Spring 2003 Professor Kose John The Super Project Case – Questions and Hints I have digested the data in Exhibit 6 to produce Modified-Exhibit#6, in the Excel Spreadsheet on my website.The management analysis in Exhibit 6 does not deduct depreciation from the project’s taxable income. I have done that in Modified-Exhibit#6. - In Exhibit 6, the first change in Net Working Capital occurs in period 1. I have kept that assumption

The Super Project Essay

1451 words - 6 pages Super Project Contents Introduction & Problem Statement 3 Analysis 3 Conclusions 5 Appendix 1. Incremental basis method 6 Appendix 2 Facilities-used basis method 7 Appendix 3 Fully allocated basis method 8 Appendix 4 9 Appendix 5 10 Introduction & Problem Statement General Foods Corporation is a food producer that is operating in desserts market. Company now is evaluating the Super project: launch of a new

Super Project Case Analysis

1156 words - 5 pages Analysis of Super Project Case Quick Overview Relevant cash flows analysis The relatively well posed project with promises of great future pay offs must be examined closely nevertheless to determine its true profitability. As such, the Super Project’s NPV must be calculated, however before we proceed we must acknowledge the relevant cash flows. The project incurred an expense of testing the market. This expense, however, must not be