Galveston Fishing Company

FNCE 726 : Advanced Corpo stray Finance  Catherine Cheng, Yulin Wang, Liming Yao, Bin Zhao    GALVESTON FISHING cordial club Case Analysis Business Expansion Galveston look for Company, one of the largest producers of frosty half-pint in US, is planning to figure fish treat care in addition to its brisk shrimp fish and distribution chore. Existing Business angle Distribution hearty seller gross sales outlets youthful-fangled Business (purchased shrimp) Processing Sales outlets Expanding into the shrimp affect business is a feasible business strategy. The vernal shrimp affect business end progress to synergies with the parent partnership in two ways: first, it can utilize some animated equipment; second, the demand exceeds supply for the bare-ass shrimp go with and less(prenominal) intercompany sales are contemplated, alleviating the proscribe impact on come up cash flow to the company as a full-length entity. To our attention, the ne w business get out purchase the shrimp from the open market and its COGS will be subject to the vacillation of the sore shrimp price. The lower the market price for new(a) shrimp, the lower COGS for the new business. However, the parent company would benefit from the high raw shrimp price beca phthisis it besides operates the fish business and make profit from selling the raw shrimps.

So in our valuation of the new business, we prefer determination a high risk beta. The cost of capital of the shrimp process business Companies in the same business face similar operating risks, so they should have similar operating betas. We would manipulation the! industry betas to calculate the cost capital of Galvestons new shrimp touch on plants. In current shrimp processing industry, there are only two publicly traded firms, rate Isle and Ocean Foods. First, we calculate the unlevered beta of individual firms. Second, we catch the operating details of those two comparable firms. We compare the ratios of sales, dough income and assets of those two companies and find the ratios of sale and asset...If you want to get a full essay, order it on our website: BestEssayCheap.com

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