Eskimo Pie Corporation :: Business Management Essays

Eskimo Pie CorporationIntroductionReynolds Metals is the majority causeer of the ice holler out lodge Eskimo Pie Corporation and has decided to snitch this company. Nestle Foods provided the highest offer of $61 Million. Due to delays of the Nestls purchase, Reynolds Metals has take into consideration the IPO proposal of David Clark, chair of Eskimo Pie Corporation, rather than selling the company to Nestle Foods (Case Study, 2001). This analysis will detect the current range of the company at a stand-alone care for and explain why Nestle Food would want to buy this company and the synergies involved for their reasoning. We will also discuss who will benefit if Reynolds Metals were to sell to Nestle or were to create an IPO. Finally we will provide a recommendation for Reynolds Metals that will be most beneficial to the company financial needs. Stand-Alone ValueThere are many valuation methods that could be used to evaluate this company. Finding a method that valuates the st and-alone value is difficult. The stand-alone value should be dependent upon the firms own assets and projected future income. We decided to evaluate this company based upon devil methods The Discounted Cash Flow order and the corresponding Companies Method. Discounted Cash Flow Method takes the forecast free cash flows during forecasted horizon. Then we estimate the cost of superior (weighted average cost of capital) and estimate continuing value (value after forecast horizon). The future value is discounted to the present value. We than add back cash ($13 Million) and non-current assets and deduct total debt. With the information provided several assumptions had to be made to perplex reasonable values (life period of 30- forms, Capital expenditures not to exceed $1 million dollars, depreciation to stay constant at $1.15 Million and a discounted rate of 10%). Based on our analysis, the company has a stand-alone value of $51 Million at the end of fiscal year end 1990 with a net present value of cash flows of $33 million that does not include the cash and non-current assets a cash of and non-current assets. The sterling(prenominal) risk using Discounted Cash Flow Method is all the assumptions that were made. Without learned and having complete information this method could report underestimated or overstatement figures. The sec method we used to analyze the firms value was the Comparable Companies Method. We used the historical figures as of 1990 and Goldmans Sachs Projections. With an average of 22.