Shato-marium university and creative

technology

Submitted to:
Robaiyat shaimon
Lecturer
Department of Business Administration
Shanto-marium university and creative technology
Submitted by:
S.m.rahamat miah
Robin
Baser
Likhon
Mehedi
robiul
Section-B, 25th batch,5th semester
Bachelor Business Administration
Shanto-marium university and creative technology
April 6, 2014

Subject: Report on "Case Analysis of Hope-In Food Store, Incorporate."

Dear Sir,
At the threshold of submitting this report on Case Analysis of Hope-In Food Store,
Incorporate. We are feeling immense pleasure to prepare this report as a partial
requirement of Fundamentals of investment course. We would like to mention that, we
tried our best to prepare this report to our greater extent through reading, consulting,
discussing among the members of our group to make it a comprehensive one. But due to
the limitation of knowledge there might be some unforeseen mistake and incompleteness
in our paper. We hope that you will overlook them with kind consideration that we are
still learners and will give us the necessary suggestions that you always give for the
improvement of our quality in future. We again express our gratitude to you to give us the
opportunity of analyzing this case.
We would like to place this Paper for your evaluation & recommendations.
Thanking you.
Sincerely Yours
Unisoul group
Section-B, 25th Batch,5th semester
Bachelor of Business and Administration
ACKNOWLEDGEMENT
As per requirements of the Bachelor of Business and Administration (BBA) program our
honourable course teacher Mr. Robaiyat shaimon has assigned a report in the course
curriculum. Our assigned report is "Case Analysis of Hope-In Food Store, Incorporate ".
We express our sincere gratitude to our honourable course teacher Mr. Robaiyat shaimon
lecturer of the Department of Business Administration, Shanto-marium university and
creative technology. for his guidance, advice and assistance in preparing the assigned
case. We are really grateful to our course instructor for his unstinted support, timely and
sophisticated direction and finally endless morale in learning the knowledge through
preparing this report. This analysis helped us a lot in understanding how to determine the
appropriate offer price for the new stock. It has also enhanced our analytical and decision
making ability. Finally, thanks are also due to our group members who have done their
job enthusiastically and perfectly.

Origin of report
This report (Case Analysis of Hope-In Food Store, Incorporate) is assigned by our
honourable course teacher Mr. Robaiyat shaimon as a partial fulfillment of the course
FIN-302 "Fundamentals of Investment". The report is the elaboration of determine the
appropriate offer price for the new stock decision among our group members. It was a
mater of group discussion and understanding. Assignment submission and presentation is
the requirement for Bachelor of Business Administration (BBA) degree. We think that
this case analysis will enhance our conceptual knowledge about offer share price and now
we are confident enough to determine the appropriate offer price for the new stock.
Scope
The scope of this report is limited within the Hope-In Food Store, Incorporate to
determine initial public offering (IPO) and the securities industry of United States.
Objectives
1. To be able to use theoretical knowledge into practically to determine the offer price for
the new stock.
2. To develop our skill in using analytical tools and techniques for determine the offer
price.
3. To develop our interpersonal views and concept through sharing among every member
of the group that is reflected in this report.
Limitations
Although efforts made to make the report was as comprehensive as possible,
nevertheless, the following limitations are identified at the time of preparing the report:
1. We worked under a limited time passage.
2. A lot of information regarding industry, economy, and company are required.
3. We have put our optimum effort to formulize the available information
4. Many analytical techniques and tools are needed to apply to get appropriate result
but due to our lack of practical knowledge our analysis may not be a highly efficient one.
Subjective:
Company Background
Hop-In Food, incorporated on June 23, 1966 started in Roanoke as a single store selling a broad line
of foodstuff and convenience items.
Since 1966, sales had grown at a 55% annual rate, and by the end of 1966, the company operated
84 stores in two states.
Hop- In Food had grown primarily through the acquisition of established stores rather than by the

internal expansion, of the 84 stores operating at the end of 1977, 58 had been acquired.
The company pursued this policy of growth by acquisition because experience had proven both the
cost and risk of operating a new store to be generate than those of purchasing an established one.

SWOT Analysis
Strength:
a) New store site were selected on the basis of residence density the extent of street and highway
access and the proximity of competing stores.
b) Financial statements had prepared according to generally Accepted Accounting Principles and
annual reports had been published each fiscal year.
Weakness:
a) At the end of 1976, the company purchased the assets and for this the company used a portion
of short term debt.
b)The Lack of an established dividend policy.
c)Price Hop-In foods auditors were not one of the big firms.
Opportunity:
a) Rebalancing financial leverage position through the new issue.
b) New Issue would strengthen companys bargaining power with lenders
c) Publicly traded stocks would be a more effective tool for use in acquisitions.
Threat:
a) Competitors with greater size, economies of scale in purchasing, and national advertising.
b)Sales of grocery and other staple items declined because the competition within the retail food
industry was increased.
c)Failure to determine right stock price the companys goodwill may damage and that affect
distribution network for future new issue.
Problem Statement
Hop-In Stores, Incorporated is facing supernormal growth in sales which requires a new financing
strategy. And the company is interested to go for public offering.
So, the main concern is to determine the appropriate offer price for the new stock.
Economy Analysis
General feeling about the nations economy was optimistic.
Forecasts suggested that interest & bond coupon rates would fall.
Declining interest rates would draw investors fund away from Fixed Income Security market into
the Equity Security market.
Assumptions

Industry consists of only the mentioned companies in the case.

Risk free rate is 6%
Beta of the company is 1.5
Marginal Tax Rate considered
Company has only Common equity
Retention Ratio, Rate of Return and Cost of capital are fixed
Terminal growth rate is 4%

Weighted sales growth is considered

Gross margin and all op erating expense increases as a percentage of sales revenue

GE MATRIX:

PORTERS FIVE factors:

Objective :

Per Group Average of Price/Earning Ratio (Trend)

Price/Earning

1972

1973

1974

1976
(10/29/76)

1975

Average

Southland

25

15.5

9.5

10.5

14.5

15

Munford

14

4.5

7.1

Dillon

21.5

15

12

12.5

13

14.8

Sunshine Junior
24.5
National Convenience
Store
22.5

11.5

7.5

10.9

10

6.5

10.2

Circle K

22.5

7.5

6.5

15.3

35

Industry Average

Ratio analysis:
Current ratio: current asset/current liabilities
=1864038/2245255
=0.830
Quick ratio: current asset-inventories/current liabilities
=1864038-1495518/2245255
=0.164
Cash ratio: cash/current liabilities
=106154/2245255
=0.047
Total debt ratio: total assets-total equity/total asset

12.21667

=4187718-1253785/4187718
=0.701

ratio
current ratio
quick ratio
cash ratio
total asset
ratio

amount
0.83
0.164
0.047
0.701

CONCLUTION :
Minimum acceptable share price by investment banker was $10.6 per share and Hop In Food determined that the share price
would be $150.50.
So, Investment bank Scott and String fellow will be benefited by underwriting Hope-In Food shares. On the other side,
expecting market price growth is 10% to 20%.
So, this is high time for share issue in the market and investment bank will be gainer by underwriting the companys share
because the companys growth position and financing position is better.