Pan Europa Essay

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Pan Europa Foods Case Study 1. In order for Pan Europa to not be a victim of a hostile takeover, they must not think of cutting their dividends. If this was pursued it would show that the senior management had a lack of faith in the company’s future. They also should not sell their stocks at lower prices as this would affect their current stockholders. Since these options are not recommended, they should reduce their capital spending instead and this is what the board decided to do eventually. Pan Europa had a debt-to-equity ratio of 125% and they had relied heavily on debt financing during the price wars. Now that this period was over, they should focus on the amortization of this accumulated debt and try and bring down the debt-to-equity ratio to an acceptable figure. Pan Europa’s sales had been pretty static since 1990 and some reasons for this were low population growth and market saturation. Even new product introductions had failed for them. Hence, I believe it was a time to try something new. I believe that Nigel Humbolt should be at the fore, with his proposal of acquiring an already established and leading schnapps brand. Even though a bold move, I believe that this can be a turning point for the company. 2. Annuities correct certain duration related differences between projects and hence it would be a wiser option to use Annuity instead of NPV as it provides a better idea of the payback potential of a project. Going by Annuity, following is the ranking of the projects: * Project 11 (Strategic Acquisition) * Project 7 (Eastward Expansion) * Project 9 (Snack Foods) * Project 8 (Southward Expansion) * Project 4 (Artificial Sweetener) * Project 10 (Inventory Control System) * Project 2 (New Plant) * Project 3 (Expanded Plant) * Project 5 (Automation and Conveyer Systems) * Project 1 (Expand Truck Fleet) The

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