INBOX (1 NEW EMAIL)
From:Frank Marinara, Director of Finance
To:You and Finance Team
I hope you are ready to move forward with the project at hand. I want to give you the background on the McCormick & Company case and instructions for this project.
McCormick & Company approached MCS because they would like to increase the production of their spice products and are considering the construction of a new factory in Largo, Maryland. The new factory would allow the company to increase its overall production capacity. As McCormick decides whether to build the factory, they are asking our finance team to evaluate options to finance this construction. McCormick has provided MCS with the purchase price, expected cash flow, and two new product lines projects they expect to run in the newly built factory.
To understand which financing option would be best for the client, you must first understandtime value of money,present value,future value, andloan amortization. These topics will help you make recommendations about the relative benefits and drawbacks of each option.
Working in the attached Excel Workbook, complete the Financing and Investing worksheet. The Financing and Investing worksheet contains information about present value, revenue, expenses, and cash flows, as well as questions that will help Frank guide the client in selecting the best financing option.
When you have completed the Financing and Investing worksheet, submit it to the submission folder located in the final step of this project. You should aim to complete this step during Week 7. Then, proceed to Step 3, where you will examine the factors affecting McCormick’s corporate valuation.
Looking forward to seeing your work,
Frank
McCormick & Company is also interested in gaining further insight on the
corporate valuationof the company, as they need to know how much capital they’ll need to raise to construct the factory. To understand valuation, you must review
dividends,
options,
warrants,
derivatives,
discount rate, and
yield.
Dialogue with Frank Marinara
Frank tasks you with recommending a method for raising sufficient capital. “McCormick & Company has been paying dividends to its shareholders for several years now,” he says. “The company has given us some data and would like us to recommend ways they can further leverage their financing activities. The company is interested in potentially issuing more stock or purchasing bonds to raise additional capital for the construction of the new factory. I will need you to answer a few questions about the company’s stock prices and minimum acceptable rate of return. Your answers will help me make a recommendation to McCormick.”
Working with the same Project 4 Excel Workbook you worked with in Step 1, complete the Valuation of Performance worksheet. This worksheet contains information on McCormick’s dividends,stocks, andrisk premiums, as well as questions that will guide the client’s decisions.
When you have completed the Valuation of Performance worksheet, submit the Project 4 Excel Workbook to the folder located in the final step of this project. Next, proceed to Step 3, in which you will advise the client on selecting a retirement plan for its employees.
As McCormick & Company reviews its capital in preparation for constructing the factory, it has asked MCS to help with the process of selecting the best retirement options for their employees.To help McCormick make the best decision based on our recommendations, you will need to understand several concepts:
You will also apply what you learned about present value and future value.
Working with the sameProject 4 Excel Workbookyou will use in Steps 1 and 2, complete the Annuities worksheet. The worksheet poses questions about the retirement annuities, US treasury bond rates for the employees’ portfolios managed by a retirement fund company, and annuities for employee's personal investments. This information will clarify the best choice of retirement plan for McCormick employees.
When you have answered the questions provided, submit the Project 4 Excel Workbook to the submission folder in the final step of this project. Then continue to Step 4, where you will discuss risk and returns with your colleagues.
At the conclusion of your project, Frank requests an executive summary based on your analysis and recommendations in the previous steps. He is planning on using this executive summary to provide the client, McCormick & Company, with guidance on the potential construction of an additional factory. This executive summary should include facts and figures to support your recommendations. The report should highlight your analysis and recommendations based on the work you completed in the Project 4 Excel Workbook. Be creative and use charts, graphs, or any other tools you feel would be useful to convey your analysis and recommendations. Post your executive summary to management in the submission folder located in the final step of this project.