财务管理案例（LAURENTIAN BAKERIES）

1、霸LAURENT疤IAN BAK白ERIES盎The dec拌ision-m摆aker mu熬st make巴 a reco捌mmendat绊ion on 稗a large邦 expans傲ion pro奥ject. D绊iscount艾ed cash挨 flow a柏nalysis爸 is req稗uired.伴In late安 May, 1啊995, Da啊nielle 案Knowles耙, vice-袄preside扳nt of o翱peratio疤ns for 癌Laurent伴ian Bak跋eries I昂nc., wa懊s prepa叭ring a 啊capital扳 expen

2、d八iture p百roposal背 to exp阿and the办 compan拜ys fro罢zen piz俺za plan搬t in 昂Winnipe胺g般 矮Manitob巴a靶. If th拌e oppor背tunity 肮to expa颁nd into按 the 埃U.S.半 frozen佰 pizza 昂market 癌was tak安en, the哎 compan颁y would唉 need e爱xtra ca安pacity.奥 A deta百iled an疤alysis,半 includ吧ing a n扳et pres伴ent val八ue calc颁ulation暗, wa

3、s r盎equired巴 by the艾 compan碍ys Cap叭ital Al拜locatio爱n Polic稗y for a罢ll capi扒tal exp罢enditur伴es in o摆rder to熬 ensure捌 that p安rojects搬 were b瓣oth pro扒fitable把 and co伴nsisten拔t with 翱corpora捌te stra懊tegies.熬COMPANY伴 BACKGR伴OUHD按Establi笆shed in胺 1984, 岸Laurent哎ian Bak笆eries I阿nc. (La霸urentia霸n) manu案fact

4、ure绊d a var矮iety of暗 frozen胺 baked 佰food pr岸oducts 隘at plan板ts in 斑Winnipe巴g罢 (pizza百s), 跋Toronto俺 (cakes巴) and 芭Montrea颁l熬 (pies)癌. While拌 each p般lant op绊erated 巴as a pr瓣ofit ce爱nter, t案hey sha坝red a c办ommon s疤ales fo百rce loc盎ated at背 the co蔼mpany 斑head of按fice in俺 暗Montrea啊l八. Altho八ugh the八 扮Toro

5、nto爱 plant 绊was res柏ponsibl奥e for o扳ver 40%瓣 of cor俺porate 把revenue俺s in fi凹scal 19霸94, and拜 the ot皑her pla安nts was敖 accoun吧ted for胺 about 胺30% eac搬h, all 百three d败ivision绊s contr八ibuted 敖equally矮 to pro傲fits. T碍he comp斑any enj唉oyed st皑rong co摆mpetiti败ve posi罢tions i半n all t隘hree ma瓣rkets a澳nd it w芭

6、as the 跋low cos澳t produ爸cer in 肮the piz爸za mark板et. Inc凹ome Sta按tements氨 and Ba傲lance S埃heets f昂or the 皑1993 to岸 1995 f案iscal y鞍ears ar扳e in Ex凹hibits 扮1 and 2艾, respe版ctively傲.哎Laurent半ian sol案d most 袄of its 盎product凹s to la澳rge gro暗cery ch疤ains, a背nd in f懊act, su爸pplying扮 severa巴l Canad敖ian cha稗in

7、s wit白h priva伴te labe拜l brand盎 pizzas袄 genera氨ted muc阿h of th爸e sales斑 growth艾. Other碍 sales 懊were ma耙de to i哎nstitut鞍ional f傲ood ser拜vices.奥The com靶panys 般success哎 was, i唉n part,跋 the pr敖oduct o唉f its m百anageme板nts ph敖ilosoph埃ies. Th碍e corne背rstone 颁of Laur把entian邦s opera傲tions w岸as its 扒includi岸ng

8、 a co霸mmitmen拌t to a 案busines瓣s strat版egy pro唉moting 唉continu盎ous imp拜rovemen颁t; for 爱example肮 all em袄ployees隘 were e扳mpowere癌d to th皑ink abo啊ut and 斑make su埃ggestio佰ns for 皑ways of蔼 reduci阿ng wast芭e. As D挨anielle邦 Knowle安s saw i败t: “Con邦tinuous吧 improv安ement i版s a way昂 of lif靶e at La奥uremtia半n.” Al

9、s碍o, the 哀company翱 was kn袄own for班 its ab班ove a背verage 熬conside叭ration 鞍for the邦 human 哀resourc敖e and e绊nvironm瓣ental i叭mpact o敖f its b靶usiness暗 decisi昂ons. Th按ese phi哀losophi办es drov澳e all p芭olicy-m艾aking, 拔includi般ng thos疤e polic班ies gov靶erning 碍capital拌 alloca芭tion.挨Daniell拔e Knowl瓣es俺Daniell肮e K

10、nowl白ess ca按reer, w坝hich sp盎anned 1半3 years捌 in the唉 food i班ndustry把, had i岸ncluded霸 positi霸ons in 叭other f邦unction皑al area柏s such 鞍as mark拜eting a败nd fina俺nce. Sh拌e had r凹eceived安 an und案ergradu芭ate deg板ree in 班mechani扒cal eng百ineerin暗g from 哎Queens邦 Univer搬sity in岸 俺Kingsto隘n绊, 叭Ontario癌, and a靶 m

11、aster笆 of bus疤iness a芭dminist澳ration 安from th百e 八Western爱 拌Busines碍s傲 氨School罢.碍THE PIZ碍ZA INDU爸STRY懊Major s碍egments翱 in the埃 pizza 靶market 耙were fr稗ozen pi碍zza, de叭li-fres挨h chill摆ed pizz袄a, rest般aurant 把pizza a罢nd take暗-out pi挨zza. Of把 these 唉four, r啊estaura靶nt and 霸take-ou邦t were 霸the lar蔼gest. W

12、瓣hile th盎ese seg奥ments c拌onsiste霸d of th斑ousands盎 of sma碍ll-owne拜d estab暗lishmen哀ts, a f暗ew larg案e North凹 Americ般an chai胺ns, whi霸ch incl蔼uded Do安minos,瓣 Pizza 按Hut and罢 Little敖 Caesar奥s, dom懊inated.颁Althoug叭h 12 fi癌rms man挨ufactur班ed froz澳en pizz岸as in 癌Canada跋, the f爸ive lar摆gest fi八rms, in俺cluding

13、百 Lauren半tian, a哎ccounte安d for 9搬5% of p岸roducti哀on. McC昂ain Foo柏ds was 坝the mar败ket lea碍der wit佰h 44% m靶arket s拜hare, w瓣hile La坝urentia傲n had 2背1%. Per暗 capita摆 consum稗ption o岸f froze哎n produ芭cts in 按Canada岸 was on矮e-third摆 of the埃 level 背in 八U.S.叭 where 熬retail 凹prices 唉were lo八wer.袄ECONOMI稗C COND

14、I板TIONS败The Nor班th Amer皑ican ec搬onomy h半ad enjo扮yed str翱ong gro般wth sin罢ce 1993白, after唉 having佰 suffer岸ed a se哀vere re唉cession绊 for th八e two p肮revious疤 years.柏 Intere岸st rate矮s botto稗med-out奥 in mid肮-1994, 疤after w扮hich th哀e U.S. 白Federal八 Reserv班e slowl敖y incre矮ased ra摆tes unt办il earl芭y 1995 安in a

15、n a矮ttempt 俺to figh百t infla跋tionary班 pressu稗res. Ne佰verthel啊ess, No矮rth Ame挨rican i熬nflatio斑n was e爱xpected癌 to ave班rage 3%熬 to 5%a澳nnually安 for th柏e fores暗eeable 肮future.半 The Ba隘nk of C靶anada f邦ollowed坝 the U.澳S. Fede懊ral Res唉erves 版lead an肮d incre芭ased in颁terest 艾rates, 霸in part蔼 to pro瓣tect th碍e

16、 Canad叭ian dol扳lars v挨alue re佰lative 暗to the 摆value o叭f the U哎.S. dol盎lar. Th背e resul俺t was a懊 North 啊America挨n growt傲h rate 昂of gros敖s domes稗tic pro凹duct th坝at was 佰showing案 signs 把of slow斑ing dow佰n.捌LAURREN拔TIANS 啊PROJECT啊 REVIEW昂 PROCES叭S跋Prior t八o the a捌pproval佰 of any安 capita鞍l alloc氨ation, 凹ea

17、ch op邦erating笆 divisi绊on was 盎require扒d to de疤velop b疤oth a S伴trategi疤c and a稗n Opera袄ting Pl伴an. The伴 Strate背gic Pla熬n had t版o ident爱ify and熬 quanti柏fy eith爱er inef艾ficienc隘ies or 邦lost op癌portuni坝ties an疤d estab版lish ta搬rgets f艾or thei霸r elimi版nation,翱 includ鞍e a thr稗ee-year埃 plan o埃f capit稗al req

18、u傲irement拜s, link挨 capita昂l spend氨ing to 班busines哀s strat颁egies a叭nd cont拌inuous 芭improve敖ment ef把fort, a袄nd achi癌eve the拔 compan傲y-wide 蔼hurdle 啊rates.按The fir般st year鞍 of the暗 Strate傲gic Pla坝n becam靶e the A疤nnual O案peratin暗g Plan.胺 This w按as supp坝orted b矮y a det氨ailed l瓣ist of 扒propose瓣d capit板al

19、proj哀ects wh皑ich bec癌ame the氨 basis 翱for cap颁ital al瓣locatio爸n. In a罢ddition哎 to mee巴ting al傲l Strat扳egic Pl傲an crit懊eria, t艾he Oper叭ating P办lan had斑 to ide氨ntify m芭ajor co艾ntinuou肮s impro哎vement 昂initiat暗ives an安d budge皑t for t皑he asso邦ciated 胺benefit颁s, as w挨ell as 霸develop扮 a trai俺ning pl翱an iden

20、凹tifying碍 specif哎ic trai耙ning ob癌jective佰s for t颁he year敖.凹These c艾riteria傲 were u版sed by 捌head of百fice to扮 keep t柏he beha鞍vior of案 divisi哎onal ma靶nagers 案consist颁ent wit敖h corpo鞍rate ob跋jective吧s. For 埃example哎, the r叭equirem暗ent to 艾develop疤 a trai爱ning pl斑an as p阿art of 胺the ope埃rationa肮l plan 岸f

21、orced 跋manager唉s to be氨 effici办ent wit蔼h emplo板yee tra熬ining a爱nd to k奥eep con昂tinuous安 improv案ement a坝s the u搬ltimate捌 object班ive.隘All pro吧posed p邦rojects拜 were s盎ubmitte半d on an爱 Author败ization爱 for Ex坝penditu芭re (AFE半) Form 霸for rev艾iew and胺 approv袄al (see摆 Exhibi疤t 3). T癌he AFE 扒had to 矮present埃

22、 the pr白ojects伴 linkag碍e to th般e busin颁ess str爱ategies吧. In ad唉dition,奥 it had按 to inc翱lude sp摆ecific 癌details搬 of eco盎nomics 耙and eng背ineerin爱g, invo班lvement稗 and em案powerme胺nt, hum坝an reso搬urce, a阿nd the 耙environ熬ment. T邦his req笆uiremen碍t ensur伴ed that啊 projec艾ts had 胺been ca昂refully肮 though袄t thr

23、ou昂gh by f癌orcing 邦manager八s to li芭st the 伴items p皑urchase拜d, the 爸employe稗es invo霸lved in翱 the pr暗oject, 百the emp埃loyees 叭adverse岸ly affe肮cted by啊 the pr安oject, 疤and the爱 effect办 of the艾 projec哎t on th笆e envir凹onment.班Approva半l of a 摆capital哀 expend佰iture p疤roposal斑 was co安ntingen版t on th败ree req哎u

24、iremen般ts whic唉h are i哎llustra跋ted in 隘Exhibit颁 4. The埃 first 佰of thes耙e requi笆rements埃 was th安e opera案ting di暗vision奥s demon碍strated扒 commit把ment to绊 contin啊uous im搬proveme扒nt (C.I版.), the氨 criter白ia of w版hich ar八e descr白ibed in翱 Exhibi耙t 5. Th鞍e secon扮d requi笆rement 靶was tha埃t all p矮rojects霸 of mo

25、r邦e than 败$300,00埃0 be in艾cluded 跋in the 靶Strateg澳ic Plan啊. The f坝inal re把quireme耙nt was 懊that fo瓣r proje奥cts gre奥ater th稗an $1 m岸illion,罢 the op版erating氨 divisi百on had 拔to achi半eve its扮 profit隘 target盎. Howev安er, if 邦a proje挨ct fail板ed to m拌eet any版 of the板se requ皑irement拌s, ther埃e was a佰 mechan胺is

26、m thr扒ough wh敖ich eme哀rgency 伴funds m暗ight be搬 alloca懊ted sub版ject to百 the co般rporate爱 execut半ive com翱mittee吧s revie拌w and a背pproval败. If th扮e proje斑ct was 稗less th懊an $1 m唉illion 办and it 笆met all瓣 three 拌require懊ments, 哎only di肮visiona霸l revie岸w and a靶pproval百 was ne罢cessary爱. Other稗wise, a氨pproval

27、捌 was ne芭eded fr佰om the 爸executi把ve comm傲ittee.扮The pro摆posed 凹Winnipe癌g佰 plant 柏project懊 was co八nsidere唉d a cla跋ss 2 pr俺oject a扳s the e懊xpendit鞍ures we拌re mean拌t to in瓣crease 哎capacit啊y for e拌xisting盎 produc哀ts or t扳o estab袄lish a 叭facilit昂y for n暗ew prod肮ucts. C般apital 翱project奥s could背 fall i捌nto

28、 one盎 of thr白ee othe胺r class案es: cos斑t reduc阿tion (C办lass 1)哎; equip隘ment or巴 facili懊ty repl笆acement稗 (Class跋 3); or白 other 拌necessa般ry expe哎nditure搬s for R啊&D, pro巴duct im懊proveme拔nts, qu啊ality c霸ontrol 拌and con拜currenc罢e with 扒legal, 百governm坝ent, he阿alth, s败afety o靶r insur埃ance re版quireme班nts inc

29、败luding 背polluti板on cont阿rol (Cl芭ass 4).稗 A proj罢ect spe般nding a挨udit wa袄s requi哀red for伴 all ex斑penditu疤res; ho阿wever, 澳a savin佰gs audi哀t was a敖lso nee巴ded if 皑the pro挨ject wa稗s consi扮dered e绊ither 1吧 or 2. 办Each cl安ass of 胺project巴 had a 爱differe爸nt hurd把le rate白 reflec翱ting di哀fferent暗 levels败 of

30、 ris坝k. Clas班s 1 pro艾jects w癌ere con白sidered白 the mo霸st risk坝y and h啊ad a hu罢rdle ra板te of 2案0%. Cla肮ss 2 an拜d Class百 3 proj扒ects ha叭d hurdl艾e rates唉 of 18%矮 and 15稗%, resp癌ectivel拔y.绊Knowles办 was re艾sponsib般le for 扒develop靶ing the矮 胺Winnipe岸g懊 divisi跋ons Ca啊pital P爸lan and袄 comple阿ting al哀l AFE f癌o

31、rms.霸WINNIPE扮G叭 PLANT翱S EXPAN翱SION OP板TIONS阿Laurent班ian had拜 manufa唉ctured 矮frozen 班pizzas 班at the 靶Toronto把 plant 佰until 1颁992. Ho罢wever, 癌after t百he comp摆any bec唉ame the捌 sole s把upplier肮 of pri绊vate-la盎bel fro把zen piz胺zas for叭 a larg哀e groce扮ry chai白n and w版as forc百ed to s柏ecure a敖ddition巴al capa暗

32、city, i懊t acqui氨red the袄 凹Winnipe绊g按 frozen稗 pizza 败plant f胺rom a c白ompetit跋or. A p邦rogram 癌of regu疤lar mai爱ntenanc拜e and e肮quipmen拌t repla暗cement 罢made th邦e new p搬lant th俺e low c鞍ost pro癌ducer i挨n the i翱ndustry跋, with 疤an oper版ating m案argin t昂hat ave般raged 1拜5%.暗The pla疤n, with背 its pr叭oven co班mmit

33、men败t to co啊ntinuou扮s impro把vement,班 had su捌ccessfu蔼lly met岸 its pr袄ofit ob矮jective哎 for th八e past 艾three y扒ears. A跋fter th叭e short凹age of 阿capacit霸y had b笆een ide懊ntified熬 as the坝 plant澳s large俺st sour颁ce of l捌ost opp岸ortunit百y, mana氨gement 俺was eag办er to r跋ectify 扒this pr佰oblem a啊s targe拜ted for版

34、in the哀 Strate蔼gic Pla哀n. Beca耙use the柏 facili靶ty had 盎also in扒cluded 罢the pro岸posed p扒lant ex坝pansion芭 in its斑 Strate半gic Pla哀n, it m案et all 扒three r阿equirem霸ents fo扒r consi版deratio靶n of ap氨proval 扮for a c癌apital 摆project翱.叭Annual 巴sales h癌ad matc哎hed pla搬nt capa瓣city of瓣 10.9 m捌illion 隘frozen 拌piz

35、zas 佰when La爱uentian笆 conclu背ded tha伴t oppor艾tunitie斑s simil巴ar to t稗hose in袄 哎Canada颁 existe蔼d in th澳e 爸U.S.拜 An opp靶ortunit搬y surfa跋ced whe暗reby La半urentia敖n could靶 have a胺n exclu熬sive ar哀rangeme芭nt to s搬upply a捌 large 碍U.S.-ba柏sed gro八cery ch熬ain wit爸h its p懊rivate-半label-b笆rand fr半ozen pi耙zzas b

36、e艾ginning鞍 in Apr埃il, 199疤6. As a凹 result颁 of thi板s arran霸gement,巴 frozen版 pizza 案sales w哀ould in坝crease 啊rapidly巴, addin跋g 2.2 m隘illion 蔼units i挨n fisca半l 1996,疤 anothe案r 1.8 m邦illion 跋units i盎n fisca佰l 1997,伴 and th摆en 1.3 拜million阿 additi巴onal un哎its to 白reach a澳 total 靶of 5.3 搬million笆 additi疤on

37、al un百its by 昂fiscal 肮1998. H耙owever,拜 the te班rms of 唉the agr扒eement 澳would o澳nly pro皑vide La澳urentia芭n with 叭guarant跋eed sal耙es of h哀alf thi佰s amoun啊t. Know巴les exp皑ected t哎hat the隘re was 隘a 50% c胺hance t盎hat the白 grocer敖y chain拔 would 哀order o芭nly the霸 guaran埃teed am坝ount. L把aurenti耙an sold巴 froze

38、n耙 pizzas挨 to its背 custom艾ers for懊 $1.7 i班n 1995 皑and pri拌ces wer挨e expec凹ted to 按increas奥e just 暗enough 八to keep哎 pace w捌ith inf巴lation.隘 Produc盎tion co办sts wer版e expec暗ted to 班increas班e at a 安similar瓣 rate.岸Laurent皑ian had扮 consid敖ered, b稗ut reje按cted, t埃hree ot摆her alt扮ernativ把es to i碍ncrease埃 it

39、s fr摆ozen pi肮zza cap昂acity. 瓣First, 颁the acq哀uisitio唉n of a 佰competi巴tors f爸acility凹 in 芭Canada凹 had be爸en reje班cted be扳cause t傲he equi盎pment w哎ould no版t satis澳fy the 斑immedia邦te capa阿city ne叭eds nor盎 achiev癌e the c暗ost red绊uction 背possibl爱e with 蔼expansi背on of t奥he 挨Winnipe盎g罢 plant.俺 Second碍, the

40、a巴cquisit拔ion of 哎a compe癌titor i暗n the 癌U.S.袄 had be柏en reje版cted be吧cause t背he avai百lable p唉lant wo摆uld req碍uire a 澳capital拜 infusi霸on doub邦le that爱 requir啊ed in 坝Winnipe霸g班. As we罢ll, the瓣re were芭 risks 板that th挨e produ疤ct qual昂ity wou搬ld be i蔼nferior袄. Last,斑 the ex挨pansion扮 of the巴 耙Toronto啊 ca

41、ke p罢lant ha凹d been 佰rejecte伴d as it拜 would 罢require癌 a capi跋tal out板lay sim捌ilar to靶 that i霸n the s扒econd a凹lternat疤ive. Th凹e only 把remaini办ng alte罢rnative版 was th癌e expan唉sion of挨 the 耙Winnipe奥g败 plant.熬 By kee爱ping th肮e froze阿n pizza伴 in 熬Winnipe案g捌, Laure笆ntian c巴ould be背tter ex暗ploit e败conomie盎

42、s of sc搬ale and巴 assure瓣 consis皑tently 隘high pr佰oduct q拔uality.把The Pro肮posal 翱The exp挨ansion 把proposa哀l, whic澳h would柏 requir拌e six m安onths t芭o compl芭ete, wo懊uld rec搬ommend 哀four ma隘in expe癌nditure吧s: expa绊nding t哀he exis捌ting bu邦ilding 挨in 艾Winnipe翱g哎 by 60%邦 would 鞍cost $1按.3 mill靶ion; ad袄ding a

43、昂spiral 版freezer败, $1.6 哎million班; insta案lling a翱 new hi般gh spee坝d pizza办 proces敖sing li拜ne, $1.捌3 milli癌on; and埃 acquir拔ing add熬itional矮 wareho按use spa袄ce, $60暗0,000. 巴Includi邦ng $400扮,000 fo疤r conti班ngency 爸needs, 懊the tot澳al cash百 outlay傲 for th唉e proje爸ct woul柏d be $5拔.2 mill扒ion. Th阿e equip鞍men

44、t wa安s expec奥ted to 叭be usef拜ul for 笆10 year唉s, at w熬hich po八int its般 salvag扳e value扳 would 叭be zero白.靶The lan柏d on wh摆ich the半 阿Winnipe埃g拜 plant 吧was bui肮lt valu啊ed at 2唉50,000 袄and no 懊additio柏nal lan昂d would斑 be nec耙essary 芭for the白 projec胺t. Whil搬e the e傲xpansio胺n would吧 not re搬quire L伴aurenti绊a

45、n to i柏ncrease安 the si绊ze of t凹he plan案ts adm笆inistra安tive st稗aff, Kn叭owles w拔ondered艾 what p扒ortion,碍 if any百, of th拔e $223,翱000 in 熬fixed s靶alaries傲 should扳 be inc巴luded w半hen eva绊luating罢 the pr半oject. 扮Likewis八e, she 肮estimat熬ed that氨 it cos案t Laure皑ntian a叭pproxim鞍ately $捌40,000 皑in sale白s staf

46、f熬 time a爸nd expa搬nses to暗 secure岸 the 暗U.S.拜 contra胺ct that傲 had cr拔eated t扳he need蔼 for ex斑tra cap叭acity. 搬Last, n拌et work傲ing cap碍ital ne爱eds wou肮ld incr霸ease wi摆th addi邦tional 凹sales. 扒Working哎 capita拜l was t盎he sum 懊of inve扮ntory a佰nd acco八unts re白ceivabl爱e less 板account奥s payab昂le, all按 of whi

47、百ch were蔼 a func胺tion of昂 sales.罢 Knowle版s estim版ated, h斑owever,奥 that t绊he new 坝high-sp笆eed lin袄e would瓣 allow 啊the com斑pany to颁 cut tw按o days 癌from av矮erage i叭nventor背y age.碍Added t熬o the b碍enefit 埃derived艾 from i叭ncrease肮d sales百, the p啊roject 罢would r肮educe p挨roducti埃on cost暗s in tw熬o ways.版 Fir

48、st,案 the ne吧w high-八speed l办ine wou傲ld redu背ce plan疤t-wide 盎unit co败st by $凹0.009, 伴though 邦only 70班% of th笆is incr皑eased e唉fficien挨cy woul伴d be re板alized 皑in the 岸first y摆ear. Th搬ere was跋 an equ稗al chan版ce, how拌ever, t瓣hat onl半y 50% o柏f these罢 saving凹s could安 actual矮ly be a斑chieved哀. Secon爱d, “oth稗

49、er” sav笆ings to阿taling 捌$138,00奥0 per y拜ear wou绊ld also哀 result皑 from t跋he new 拌line an靶d would按 increa败se each柏 year a靶t the r跋ate of 啊inflati哀on.吧Each ye皑ar, a c胺apital 八cost al奥lowance矮 (CCA),敖 akin t邦o depre鞍ciation般, would奥 be ded矮ucted f唉rom ope拌rating 爱income 拜as a re靶sult of搬 the ca傲pital e拜

50、xpendit把ure. Th靶is dedu霸ction, 唉in turn鞍, would奥 reduce安 the am蔼ount of背 corpor巴ate tax安 paid b佰y Laure疤ntian. 盎In the 摆event t百hat the疤 compan霸y did n拜ot have靶 positi般ve earn澳ings in捌 any ye按ar, the癌 CCA de案duction柏 could 皑be tran百sferred般 to a s矮ubseque巴nt year埃. Howev八er, cor奥porate 俺earning搬s we

51、re 般project隘ed to b隘e posit摆ive for鞍 the fo奥reseeab爸le futu皑re. Kno笆wles co奥mpiled 拜the eli啊gible C扮CA dedu靶ction f摆or 10 y翱ears (s懊ee Exhi案bit 6).挨 For th扳e purpo芭se of h拌er anal熬ysis, s靶he assu半med tha昂t all c奥ash flo按ws woul昂d occur暗 at the邦 approp癌riate y摆ear-end靶.叭Three a按reas of佰 enviro皑nmenta

52、l般 concer吧n had t艾o be ad氨dressed白 in the袄 propos啊al to e岸nsure b隘oth con笆formity碍 with L捌aurenti板an poli挨cy and 矮complia半nce wit熬h regul扒atory b斑odies a绊nd loca颁l by-la啊ws. Fir捌st, des哀ign and案 instal肮lation 稗of sani挨tary dr暗ain sys奥tems, i胺ncludin稗g re-ro般uting o扳f exist鞍ing dra绊ins, wo绊uld imp巴ro

53、ve sa扳nitatio白n pract疤ices of叭 efflue扒nt/wast捌ewater 半dischar胺ge. Sec艾ond, th昂e provi按sion of翱 water-挨flow re稗cording埃 meters拔 would 瓣quantif挨y water捌 volume蔼s consu稗med in 笆manufac皑turing 疤and hel稗p to re罢duce it背s usage皑. Last,败 the re阿frigera敖tion pl熬ant wou昂ld use 奥ammonia岸 as the搬 coolan八t as o

54、p稗posed t挨o chlor半o-fluro鞍-carbon哀s. Thes扳e initi版atives 靶were co埃nsidere皑d suffi胺cient t版o satis靶fy the 般criteri巴a of th凹e Capit案al Allo邦cation 皑Policy.蔼THE DEC把ISION半Knowles罢 believ扮ed that氨 the pr奥oject w敖as cons凹istent 敖with th版e compa肮nys bu埃siness 瓣strateg拌y since俺 it wou碍ld ensu碍re that艾 the

55、熬Winnipe佰g耙 plant 熬continu矮ed to b爸e the l爸ow cost蔼 produc埃er of f凹rozen p吧izzas i奥n 耙Canada柏. Howev笆er, she案 knew t扒hat her阿 analys叭is must瓣 consid搬er all 拜factors邦, inclu疤ding th俺e proje败cts ne爱t prese绊nt valu瓣e. The 哀plants把 capita熬l alloc挨ation r邦eview c按ommitte败e would耙 be fol敖lowing 办the pro碍c

56、edures扳 set ou埃t in th隘e compa凹nys Ca扮pital A跋llocati坝on Poli捌cy as t背he basi板s for r背eviewin般g her r八ecommen鞍dation.八Knowles邦 consid芭ered th跋e impli袄cations白 if the笆 projec胺t did n拔ot prov邦ide suf哎ficient皑 benefi扳t to co耙ver the把 Class 白2 hurdl傲e rate 斑of 18%.百 Enteri蔼ng the 捌U.S.拌 grocer奥y chain坝s

57、 marke鞍t was a笆 tremen埃dous op昂portuni蔼ty and 芭she con暗sidered白 what o扮ther bu瓣siness 岸could r爱esult f翱rom Lau拜rentian般s incr笆eased p版resence傲. She a背lso won背dered i蔼f the h跋urdle r绊ate for百 a proj拔ect tha凹t was m胺eant to版 increa霸se capa芭city fo翱r an ex搬isting 艾product般 should敖 be sim俺ilar to安 the c

58、o袄mpanys白 cost o拔f capit邦al, sin隘ce the 爸risk of斑 the pr凹oject s鞍hould b挨e simil白ar to t罢he over熬all ris拔k of th板e firm.摆 She kn巴ew that捌 Lauren巴tians 败board o按f direc摆tors es搬tablish挨ed a ta按rget ca版pital s拔tructur摆e that 耙include敖d 40% d奥ebt. Sh芭e also 叭reviewe拌d the c澳urrent 胺Canadia百n marke巴t bo

59、nd 靶yields,艾 which 摆are lis办ted in 案Exhibit碍 7. The昂 spread蔼 betwee八n Gover埃nment o蔼f Canad懊a bonds叭 and th暗ose of 扳corpora佰tions w蔼ith bon颁d ratin绊gs of B案BB, suc八h as La斑urentia扳n, had 吧recentl案y been 叭about 2鞍00 basi阿s point稗s (2%) 拌for mos靶t long-邦term ma碍turitie哎s. Fina佰lly, sh袄e disco叭vered t敖

60、hat Lau拔rentian稗s stoc盎k beta 稗was 0.8爸5, and 袄that, h按istoric伴ally, t颁he 耙Toronto扒 stock 胺market 搬returns哎 outper暗formed 板long-te耙rm gove凹rnment 八bonds b安y about昂 6% ann版ually.巴EXHIBIT澳 1扳INCOME 把STATEME绊NT澳For The爸 Year E暗nding M安arch 31扒($ mill翱ions) 班 癌 霸 疤 白 敖 挨 搬 败 1瓣993 哀 1994 拔 1995阿 熬 澳 R爱e