Monday, May 27, 2019

Risk Analysis


The CEO is considering purchasing a farm in Kansas because the land there is perfect for growing herbs.  However, with recent floods and tornadoes he is very weary.  If the weather is favorable with no natural disasters then McCormick and stand to make $400M if they bought a large plot of land, $150M if they bought a small plot of land and $0 if they did nothing.  But if the weather is unfavorable, they could stand to lose $25M on a large plot, $2M on a small plot and $0 on no plot..  The weather channel reports that there is a 60% chance that there will be a flood or tornado in that area within the next 2 years.   He asks his trusty analyst to do a risk analysis.  After careful analysis even though they is a lot of risk involved the CEO decided to buy the large plot of land.
Alternatives
States of Nature
EMV

Favorable Weather
Unfavorable Weather

Large Plot
$4ooM
-$25M

.40($400M) +.60(-$25M) = $145M

Small Plot
$150M
-$2M
.40($150M) + .60(-2M) = $58.8
No Plot
$0
$0
$0
Probability
.40
.60


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Sunday, May 26, 2019

Sales Analysis


McCormick currently outsources the growing of its herbs and spices to companies through out the U.S. and Central America.  By doing this they are able to save up to 30% in cost of labor and resources.  McCormick is thinking about Marketing to Japan. After doing research they found that 65% of Japanese people eat American food and 53% use dried spices when cooking.  The VP of Marketing sought out to find out is there a Market for Japanese people that both like American food and that use dried herbs and spices given that they know 12% of the population neither likes American food nor uses dried spices.
Likes to Eat American Food
Uses

Yes
No

Dried
Yes
.30
.23
.53
Herbs
No
35
.12
.47
And Spices

.65
.35


With 30% of the Japanese population believed to both like American food and use dried herbs and spices the Marketing manager decided that it would be a good idea to do Marketing in Japan.

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Cash Flow Analysis


The CEO decided that that instead of paying for the upgrades out of company fund that the company was stable enough to apply for a loan for half of the amount.  So he met with the Wolverine Bank and using the current plant as collateral, he secured a loan for $25,000,000 for 6% interest over a period of 5 years.

LOAN AMORTIZATION SCHEDULE
ENTER VALUES LOAN SUMMARY
Loan amount $25,000,000.00 Scheduled payment $587,125.73
Annual interest rate 6.00% Scheduled number of payments 48
Loan period in years 4 Actual number of payments 48
Number of payments per year 12 Total early payments $470,000.00
Start date of loan 6/1/2019 Total interest $3,121,056.54
Optional extra payments $10,000.00 LENDER NAME Wolverine Bank
PMT NO PAYMENT DATE BEGINNING BALANCE SCHEDULED PAYMENT EXTRA PAYMENT TOTAL PAYMENT PRINCIPAL INTEREST  ENDING BALANCE  CUMULATIVE INTEREST
1 6/1/2019 $25,000,000.00 $587,125.73 $10,000.00 $597,125.73 $472,125.73 $125,000.00  $  24,527,874 $125,000.00
2 7/1/2019 $24,527,874.27 $587,125.73 $10,000.00 $597,125.73 $474,486.35 $122,639.37  $  24,053,388 $247,639.37
3 8/1/2019 $24,053,387.92 $587,125.73 $10,000.00 $597,125.73 $476,858.79 $120,266.94  $  23,576,529 $367,906.31
4 9/1/2019 $23,576,529.13 $587,125.73 $10,000.00 $597,125.73 $479,243.08 $117,882.65  $  23,097,286 $485,788.96
5 10/1/2019 $23,097,286.05 $587,125.73 $10,000.00 $597,125.73 $481,639.30 $115,486.43  $  22,615,647 $601,275.39
6 11/1/2019 $22,615,646.76 $587,125.73 $10,000.00 $597,125.73 $484,047.49 $113,078.23  $  22,131,599 $714,353.62
7 12/1/2019 $22,131,599.26 $587,125.73 $10,000.00 $597,125.73 $486,467.73 $110,658.00  $  21,645,132 $825,011.62
8 1/1/2020 $21,645,131.53 $587,125.73 $10,000.00 $597,125.73 $488,900.07 $108,225.66  $  21,156,231 $933,237.27
9 2/1/2020 $21,156,231.47 $587,125.73 $10,000.00 $597,125.73 $491,344.57 $105,781.16  $  20,664,887 $1,039,018.43
10 3/1/2020 $20,664,886.90 $587,125.73 $10,000.00 $597,125.73 $493,801.29 $103,324.43  $  20,171,086 $1,142,342.87
11 4/1/2020 $20,171,085.60 $587,125.73 $10,000.00 $597,125.73 $496,270.30 $100,855.43  $  19,674,815 $1,243,198.29
12 5/1/2020 $19,674,815.31 $587,125.73 $10,000.00 $597,125.73 $498,751.65 $98,374.08  $  19,176,064 $1,341,572.37
13 6/1/2020 $19,176,063.66 $587,125.73 $10,000.00 $597,125.73 $501,245.41 $95,880.32  $  18,674,818 $1,437,452.69
14 7/1/2020 $18,674,818.25 $587,125.73 $10,000.00 $597,125.73 $503,751.63 $93,374.09  $  18,171,067 $1,530,826.78
15 8/1/2020 $18,171,066.61 $587,125.73 $10,000.00 $597,125.73 $506,270.39 $90,855.33  $  17,664,796 $1,621,682.11
16 9/1/2020 $17,664,796.22 $587,125.73 $10,000.00 $597,125.73 $508,801.75 $88,323.98  $  17,155,994 $1,710,006.09
17 10/1/2020 $17,155,994.48 $587,125.73 $10,000.00 $597,125.73 $511,345.75 $85,779.97  $  16,644,649 $1,795,786.07
18 11/1/2020 $16,644,648.72 $587,125.73 $10,000.00 $597,125.73 $513,902.48 $83,223.24  $  16,130,746 $1,879,009.31
19 12/1/2020 $16,130,746.24 $587,125.73 $10,000.00 $597,125.73 $516,472.00 $80,653.73  $  15,614,274 $1,959,663.04
20 1/1/2021 $15,614,274.24 $587,125.73 $10,000.00 $597,125.73 $519,054.35 $78,071.37  $  15,095,220 $2,037,734.41
21 2/1/2021 $15,095,219.89 $587,125.73 $10,000.00 $597,125.73 $521,649.63 $75,476.10  $  14,573,570 $2,113,210.51
22 3/1/2021 $14,573,570.26 $587,125.73 $10,000.00 $597,125.73 $524,257.87 $72,867.85  $  14,049,312 $2,186,078.36
23 4/1/2021 $14,049,312.39 $587,125.73 $10,000.00 $597,125.73 $526,879.16 $70,246.56  $  13,522,433 $2,256,324.93
24 5/1/2021 $13,522,433.22 $587,125.73 $10,000.00 $597,125.73 $529,513.56 $67,612.17  $  12,992,920 $2,323,937.09
25 6/1/2021 $12,992,919.66 $587,125.73 $10,000.00 $597,125.73 $532,161.13 $64,964.60  $  12,460,759 $2,388,901.69
26 7/1/2021 $12,460,758.54 $587,125.73 $10,000.00 $597,125.73 $534,821.93 $62,303.79  $  11,925,937 $2,451,205.48
27 8/1/2021 $11,925,936.60 $587,125.73 $10,000.00 $597,125.73 $537,496.04 $59,629.68  $  11,388,441 $2,510,835.17
28 9/1/2021 $11,388,440.56 $587,125.73 $10,000.00 $597,125.73 $540,183.52 $56,942.20  $  10,848,257 $2,567,777.37
29 10/1/2021 $10,848,257.04 $587,125.73 $10,000.00 $597,125.73 $542,884.44 $54,241.29  $  10,305,373 $2,622,018.65
30 11/1/2021 $10,305,372.59 $587,125.73 $10,000.00 $597,125.73 $545,598.86 $51,526.86  $    9,759,774 $2,673,545.52
31 12/1/2021 $9,759,773.73 $587,125.73 $10,000.00 $597,125.73 $548,326.86 $48,798.87  $    9,211,447 $2,722,344.39
32 1/1/2022 $9,211,446.87 $587,125.73 $10,000.00 $597,125.73 $551,068.49 $46,057.23  $    8,660,378 $2,768,401.62
33 2/1/2022 $8,660,378.38 $587,125.73 $10,000.00 $597,125.73 $553,823.83 $43,301.89  $    8,106,555 $2,811,703.51
34 3/1/2022 $8,106,554.55 $587,125.73 $10,000.00 $597,125.73 $556,592.95 $40,532.77  $    7,549,962 $2,852,236.28
35 4/1/2022 $7,549,961.59 $587,125.73 $10,000.00 $597,125.73 $559,375.92 $37,749.81  $    6,990,586 $2,889,986.09
36 5/1/2022 $6,990,585.68 $587,125.73 $10,000.00 $597,125.73 $562,172.80 $34,952.93  $    6,428,413 $2,924,939.02
37 6/1/2022 $6,428,412.88 $587,125.73 $10,000.00 $597,125.73 $564,983.66 $32,142.06  $    5,863,429 $2,957,081.09
38 7/1/2022 $5,863,429.22 $587,125.73 $10,000.00 $597,125.73 $567,808.58 $29,317.15  $    5,295,621 $2,986,398.23
39 8/1/2022 $5,295,620.64 $587,125.73 $10,000.00 $597,125.73 $570,647.62 $26,478.10  $    4,724,973 $3,012,876.33
40 9/1/2022 $4,724,973.01 $587,125.73 $10,000.00 $597,125.73 $573,500.86 $23,624.87  $    4,151,472 $3,036,501.20
41 10/1/2022 $4,151,472.15 $587,125.73 $10,000.00 $597,125.73 $576,368.37 $20,757.36  $    3,575,104 $3,057,258.56
42 11/1/2022 $3,575,103.79 $587,125.73 $10,000.00 $597,125.73 $579,250.21 $17,875.52  $    2,995,854 $3,075,134.08
43 12/1/2022 $2,995,853.58 $587,125.73 $10,000.00 $597,125.73 $582,146.46 $14,979.27  $    2,413,707 $3,090,113.35
44 1/1/2023 $2,413,707.12 $587,125.73 $10,000.00 $597,125.73 $585,057.19 $12,068.54  $    1,828,650 $3,102,181.88
45 2/1/2023 $1,828,649.93 $587,125.73 $10,000.00 $597,125.73 $587,982.48 $9,143.25  $    1,240,667 $3,111,325.13
46 3/1/2023 $1,240,667.45 $587,125.73 $10,000.00 $597,125.73 $590,922.39 $6,203.34  $       649,745 $3,117,528.47
47 4/1/2023 $649,745.06 $587,125.73 $10,000.00 $597,125.73 $593,877.00 $3,248.73  $         55,868 $3,120,777.20
48 5/1/2023 $55,868.06 $587,125.73 $0.00 $55,868.06 $55,588.72 $279.34  $                  - $3,121,056.54

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   $0.00
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