Mid-Atlantic Container Corporation
1) Assess the current financial health and recent financial performance of the company. What strengths and/or weaknesses would you highlight to Sarah Conner?
2) What are the key driver assumptions of the firm's financial performance? What are the managerial implications of those key drivers? That is, what aspects of the firm's activities should Sarah Conner focus on especially?
3) What is Mid-Atlantic's weighted-average cost of capital (WACC)? What are the key assumptions that especially influence WACC?
4) What are the free cash flows of the packaging machine investment? Should Conner approve the investment?
5) Forecast the firm's financial statements for 2015 and 2016. What will be the external financing requirements of the firm in those years? Can the firm repay its loan within a reasonable period? Hint: You should analyze the packaging machine investment before forecasting the financial statements.
NOTES:
• This is an individual, graded assignment.
• I am more interested in the quantitative analysis. Thus, your write-up should be (a) concise and to the point and (b) based on your quantitative analysis. The write-up should not exceed three (3) pages plus how ever many pages you need for your spreadsheet analysis. Make sure that I am able to follow your spreadsheets. That means to annotate and format appropriately. Your grade will be partly based on how you present the data to me.
• The packaging machine investment should be set up similarly to the Fonderia di Torino case that we covered in class (i.e. one spreadsheet for the existing equipment and one for the new equipment)
• You will need to unlever and relever the beta when estimating the cost of capital
• You should probably work in the following order: estimate WACC; conduct packaging machine investment analysis; forecast financial statements; conduct financial analysis. The reason for this is because if you determine that the investment in the packaging machine should be made now, it will have to be shown as an addition to Plant, Property & Equip.(and the corresponding effect on depreciation) in your forecasted financial statements.
Attachment:- Mid-Atlantic Container Corp.rar