Benjamin Michaels
August 19, 2015
Final Case Study
Finance

Pizza LLC – Case Study

My research proves this thesis. In an effort to make them simple, we often make them confusing. In this effort, at the beginning, they had an equal number of current and fixed assets. It’s the same thing yet confusing to most. Let’s continue.

Any other questions before we go on? What if they are not at full capacity? Actually, they suggested that they were in fact below. The question is, what would their maximum sales be if they were at 85% capacity before acquiring a new factory? They went up to $2.5 million, while this is only $2.3 million. This growth proves their projections and the supports the aforementioned acquisition.

It all comes back to looking at the ratio, as this is how we measure performance. We measure performance compared to our own previous years but also to current and previous competitors in our industry. That ratio, should not change, yet it improves in comparison. Less debt leads to this expansion.

After viewing the delta column, see Exhibit 2.3, calculate the interest-bearing debt for the given firm and continue toward the solution keeping the income statement balanced, and the net operating cash flow of working capital above $5,000 at all times. Though it may seem trivial, it appears harder than one would think. At this point, take the reciprocal of the beta and multiply that by g, the growth rate of the firm, in order to discover the true cost of capital though it is traditionally weighted in this scenario.

Upon coming to a conclusion, it becomes quite clear that the firm should absolutely invest in Project A, and not Project B, for the obvious reasons and calculations stated above. Whether or not it will be profitable is up to the market and consumer demand, trends, tastes, and preferences, though it all seems probable. It would take a