Super Project

Harvard Business School Case #112-034

Case Software #XLS-014

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Table A

Dessert Market, AugustSeptember 1966 Compared with AugustSeptember 1965

Change From
Aug.-Sept. 1965

Jell-O
Tasty
Total powders
Pie fillings and cake mixes
Ice cream
Total market

Aug.-Sept.1966
19.0%
4.0
25.3
32.0
42.7
100.0%

Share Points
3.6
4.0
7.6
-3.9
-3.4

Volume (%)
40.0
(new)
62.0
(no change)
5.0
13.0

Exhibit 1 Consolidated Balance Sheet of General Foods Corporation, Fiscal

Year Ended April 1, 1967 ($ millions)

Assets
Cash
Marketable securities
Receivables
Inventories
Prepaid expenses
Current assets
Land, buildings, equipment (at cost, less depreciation)
Long-term receivables and sundry assets
Goodwill
Total
Liabilities and Stockholders Equity
Notes payable
Accounts payable
Accrued liabilities
Accrued income taxes
Current liabilities
Long-term notes
3-3/8% debentures
Other noncurrent liabilities
Deferred investment tax credit
Stockholders equity
Common stock issued
Retained earnings
Common stock held in treasury, at cost
Stockholders equity
Total
Common stockshares outstanding at year-end (millions)

$20
89
180
261
14
564
332
7
26
$929

$22
86
73
57
238
39
22
10
9
164
449
(2)
611
$929
25.127

Exhibit 2 Common Stock Prices of General

Foods Corporation, 1958-1967
Year
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967

Low
$24
37-1/8
49-1/8
68-5/8
57
77-5/8
78-1/4
77-1/2
62
65-1/4

High
$39
53-7/8
75-1/2
107
96
90-1/2
93-1/4
89-7/8
83
81

Exhibit 3
basis)

Summary of Statistical Data of General Foods Corporation, Fiscal Year 19581967 ($ millions, except assets per employee and figures on a share

Income Statement
Sales to customers (net)
Cost of sales
Marketing, administrative and general expenses
Earnings before income taxes
Taxes on income
Net earnings
Tax rate
Dividends on common shares
Retain earningscurrent year
Net earnings per common sharea
Dividends per common sharea
Assets, Liabilities, and Stockholders Equity
Inventories
Other current assets
Current liabilities
Working capital
Land, buildings, equipment, gross
Land, buildings, equipment, net
Long-term debt
Stockholders equity
Stockholders equity per common sharea
Capital Program
Capital additions
Depreciation
Employment Data
Wages, salaries, and benefits
Number of employees (in thousands)
Assets per employee ($ thousands)

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967

$1,009
724
181
105
57
$48
54%
24
24

$1,053
734
205
115
61
$54
53%
28
26

$1,087
725
236
130
69
$61
53%
32
29

$1,160
764
261
138
71
$67
51%
35
32

$1,189
769
267
156
84
$72
54%
40
32

$1,216
769
274
170
91
$79
54%
45
34

$1,338
838
322
179
95
$84
53%
50
34

$1,478
937
362
177
91
$86
51%
50
36

$1,555
965
406
185
91
$94
49%
53
41

$1,652
1,012
449
193
94
$99
49%
55
44

$1.99

$2.21

$2.48

$2.69

$2.90

$3.14

$3.33

$3.44

$3.73

$3.93

1.00

1.15

1.30

1.40

1.60

1.80

2.00

2.00

2.10

2.20

169
144
107
206
203
125
49
287
11.78

149
180
107
222
221
132
44
315
12.87

154
200
126
230
247
148
40
347
14.07

189
171
123
237
289
173
37
384
15.46

183
204
142
245
328
193
35
419
16.80

205
206
162
249
375
233
34
454
18.17

256
180
202
234
436
264
23
490
19.53

214
230
173
271
477
283
37
527
20.99

261
266
219
308
517
308
54
569
22.64

261
303
238
326
569
332
61
611
24.32

28
11

24
14

35
15

40
18

42
21

57
24

70
26

54
29

65
32

59
34

$128
21
$21

$138
22
$22

$147
22
$23

$162
25
$22

$171
28
$22

$180
28
$23

$195
30
$24

$204
30
$25

$218
30
$29

$237
32
$29

Per share figures calculated on shares outstanding at year-end and adjusted for 2-for-1 stock split in August 1960.

Exhibit 6

Financial Evaluation Form of General Foods Corporation ($ in thousands)

NY 1292-C 10-64
PTD. In U.S.A.
Jell-O
Division
Project Request Detail
1. Land
2. Buildings
3. Machinery & Equipment
4. Engineering
5. Other (Explain)
6. Expense Portion (Before Tax)
7.
Sub Total
8. Less: Salvage Value (Old Asset)
9.
Total Project Cost*
10. Less: Taxes on Exp. Portion
11.
Net Project Cost
*Same as Project Request
Funds Employed
12. Net Project Cost (Line 11)
13. Deduct Depreciation (Cum.)
14. Capital Funds Employed
15. Cash
16. Receivables
17. Inventories
18. Prepaid & Deferred Exp.
19. Less Current Liabilities
20. Total Working Funds (15 Thru 19)
21. Total New Funds Employed (14 + 20)
Profit And Loss
22. Unit Volume (in thousands)
23. Gross Sales
24. Deductions
25. Net Sales
26.
Cost of Goods Sold
27. Gross Profit
Gross Profit % Net Sales
28.
Advertising Expense
29.
Selling Expense
30.
Gen. and Admin. Cost
31.
Research Expense
32.
Start-Up Costs
33.
Other (Explain) Test Mkt.
34.
Adjustments (Explain) Erosion
35. Profit Before Taxes
36.
Taxes
36A.
Add: Investment Credit
37. Net Profit
38. Cumulative Net Profit

St. Louis
Location
1st Per. 2nd Per.
$
80
120

___ Per.

The Super Project

Project Title
___ Per. ___ Per.

$200

PayBack Years From Operational Date

Part Year Calculation for First Period
Number of Full Years to Pay Back
Part Year Calculation for Last Period
Total Years to Pay Back

$200
$200
1st Per.
F 68
$200
19
$181
124
207

____________________
Date
67-89
____________________
Project No.
Supplement No.
Return on New Funds Employed10-Yr. Avg.
PAT (C A)
PBT (B A)
A - New Funds Employed (Line 21)
$380
$380
B - Profit Before Taxes (Line 35)
$239
C - Net Profit (Line 37)
$115
D - Calculated Return
30.2%
62.0%

2nd Per. 3rd Per. 4th Per.

F 69
F 70
F 71
200
200
200
37
54
70
163
146
130
134
222

5th Per.
F 72
200
85
115

6th Per.
F 73
200
98
102

7th Per.
F 74
200
110
90

- Yrs.
6.00 Yrs.
0.83 Yrs.
6.83 Yrs.

8th Per.
9th Per. 10th Per. 11th. Per.
F 75
F 76
F 77
_____
200
200
200
121
131
140
79
69
60

10-Yr.
Avg.

113

142
237

157
251

160
266

160
266

169
281

169
281

178
296

178
296

157
260

(2)
329
$510

(82)
274
437

(108)
271
417

(138)
264
394

(185)
241
356

(184)
242
344

(195)
255
345

(195)
255
334

(207)
267
336

(207)
267
327

(150)
267
380

1100
$2,200
88
2112
1100
1012

1200
2400
96
2304
1200
1104

1300
2600
104
2496
1300
1196

1400
2800
112
2688
1400
1288

1500
3000
120
2880
1500
1380

1500
3000
120
2880
1500
1380

1600
3200
128
3072
1600
1472

1600
3200
128
3072
1600
1472

1700
3400
136
3264
1700
1564

1700
3400
136
3264
1700
1564

1460
2920
117
2803
1460
1343

1000

900

700

700

730

730

750

750

841

1100

15
360
180
($643)
(334)
(1)
(308)
($308)

1050

200
(146)
(76)
(1)
(69)
(377)

210
(14)
(7)
(1)
(6)
(383)

220
168
87
(1)
82
(301)

230
450
234
(1)
217
(84)

230
450
234
(1)
217
133

240
502
261
(1)
242
375

240
502
261
(1)
242
617

250
564
293
271
888

250
564
293
271
1159

2
36
225
239
125
(1)
115

39. New Funds to Repay (21 Less 38)

$818

See Accounting & Financial Manual Policy No. 19 for Instructions.

814

800

695

440

211

(30)

(283)

(552)

(832)

Alternative Evaluations of Super Project ($ in thousands)

I.
Incremental
Basis

II.
Facilties-Used
Basis

III.
Fully
Allocated

$267

$267

$267

200
113
380

653
358
625

672
367
634

Profit before taxesa

239

211

157

ROFE

63%

34%

25%

Investment
Working capital
Fixed capital
Gross
Net
Total net investment

Jell-O project
Building
Agglomerator

Note:
a

$200 x 2/3 = $133

640 x 1/2 = 320
$453

Figures based on 10-year averages.

Assumes 20% of Super volume will replace existing Jell-O business.

tax rate
Interest Rate

Gross Sales
Deductions
Net Sales
Cost of Goods Sold
Gross Profit

52%
10% Change for sensitivies
Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

2,200
88
2,112
1,100
1,012

2,400
96
2,304
1,200
1,104

2,600
104
2,496
1,300
1,196

2,800
112
2,688
1,400
1,288

3,000
120
2,880
1,500
1,380

1,115

1,050

1,000

900

700

360
180
(643)
19
(662)

200
(146)
18
(164)

210
(14)
17
(31)

345.3
(662)
1
19
(642)
124
207
331
-2
329
(329)

431
(164)
1
18
(145)
134
222
356
-82
274
55

447
(31)
1
17
(13)
142
237
379
-108
271
3

220
168
16
152
179.72
152
1
16
169
157
251
408
-138
270
1

230
450
15
435
###
(47)
435
1
15
451
160
266
426
-185
241
29

(971)

(90)

(10)

170

480

IRR

7.42%

0
-

Expenses
Operating Expenses
Other General Expenses
Test Market Expenses
justments (Explain) Erosion
Net Profit
ages, salaries, and benefits
Income Before Taxes
taxes (av.52%)
taxes losses carried forward
Income after taxes
Add: Investment Credit
add back depreciation
After tax cashflows
Receivables
Inventories
Total Current Assets
Total Current Liabilities
Working Capital
Change in Working Capital
Capital Expenditure
Salvage Value of Facility
Free Cash Flow

(200)

Payback Years
NPV

2.2767
(149.75)

0
0
-

200

Sensitivities
Discount Rate
NPV
2%
449.18
4%
257.89
6%
97.77
8%
(36.64)
10% (149.75)
11% (199.46)
12% (245.14)

Saudi Aramco: Confidential

Year 6

Year 7

Year 8

Year 9

Year 10 10 year Av.

3,000
120
2,880
1,500
1,380

3,200
128
3,072
1,600
1,472

3,200
128
3,072
1,600
1,472

3,400
136
3,264
1,700
1,564

3,400
136
3,264
1,700
1,564

2,920
117
2,803
1,460
1,343

700

730

730

750

750

843

230
450
13
437
(228)

240
502
12
490
(256)

240
502
11
490
(256)

250
564
10
553
(288)

250
564
9
554
(289)

225
240
14
225
(188)

209
1
13
223
160
266
426
-184
242
(1)

234
1
12
247
169
281
450
-195
255
(13)

234
1
11
246
169
281
450
-195
255
-

265
10
275
178
296
474
-207
267
(12)

265
9
274
178
296
474
-207
267
-

94
1
14
109
157.1
260.3
417.4
-150.3
267.1
(27)

222

234

246

263

60
334

Saudi Aramco: Confidential

88