微信扫一扫
实时资讯全掌握
| Pearson Foods is the second largest company in the breakfast cereal and fruit juice markets. For the past five years, Pearson’s profits have exceeded the industry average, and management has decided to pursue a plan for growth. Two promising opportunities are being evaluated. Pearson’s first opportunity would be to enter the high energy, low-fat cereals market. This project would entail developing new products using new or expanded facilities and would be financed out of earnings and through a series of long-term debt offerings over the next two years. The debt offerings would raise Pearson’s debt as a percent of total capital from 22% to 30% at the end of the two-year period. The second opportunity would be to acquire Safin Bakery, a long established and well known bread and bakery goods company. The acquisition could be completed by the end of the calendar year and would be financed by cash and long-term notes. The debt as a percent of total capital would rise to 40% by the end of the calendar year. Safin Bakery would be merged into Pearson Foods but operate independently as a separate division for two years. At the end of two years, Pearson would be able to consolidate the administrative, financial, and operating functions. A. As part of a risk assessment process, identify the strategic advantages and disadvantages of Pearson Foods’ opportunity to use internal expansion by developing new products for the high energy, low-fat cereals market. B. As part of a risk assessment process, identify the strategic advantages and disadvantages of Pearson Foods’ opportunity to use external expansion by acquiring Safin Bakery. |