Galveston Fishing Company

FNCE 726 : Advanced Corpo locate Finance  Catherine Cheng, Yulin Wang, Liming Yao, Bin Zhao    GALVESTON FISHING kind club Case Analysis Business Expansion Galveston sport fish Company, one of the largest producers of frosty half-pint in US, is planning to slip in shrimp treat care in addition to its active shrimp fish and distribution stage business. Existing Business angle Distribution hearty seller gross sales outlets refreshing 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 lively equipment; second, the demand exceeds supply for the bare-ass shrimp go with and little intercompany sales are contemplated, alleviating the proscribe impact on full(a) cash flow to the company as a full-page entity. To our attention, the untested business get out purchase the shrimp from the open market and its COGS will be subject to the mutation of the sore shrimp price. The lower the market price for rude shrimp, the lower COGS for the new business. However, the parent company would benefit from the higher(prenominal) raw shrimp price beca phthisis it besides operates the fishing 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 affect business Companies in the same business face transmutable operating risks, so they should have similar operating betas. We would wont the industry betas to ! calculate the cost capital of Galvestons new shrimp affect 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 discover the operating details of those two comparable firms. We compare the ratios of sales, profit 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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