Must use the case on Pacific Grove Spice Company to answer the following 10 questions. Please use clear sentences and provide exhibits for questions that require exhibits.
Author: William E. Fruhan; Craig Stephenson
- . (10 Points) What is the immediate problem facing CEO Peterson? How did Pacific’s industry, business model, strategy, performance, growth, financing, capital structure, and operating environment combine to create this problem? Can Pacific quickly work its way out of this problem? How does this problem constrain Pacific’s operations?
- . (10 Points) How attractive is the opportunity to produce and sponsor the new television program? Is Pacific in a position to take advantage of this opportunity?
- . (20 Points) Should Pacific sell new common stock to the external investment group? What are the strengths and weaknesses of this opportunity?
- . (75 Points) Is the acquisition of High Country a good investment opportunity? What are its free cash flows, risk-adjusted cost of capital, and value? Is this a positive net present value decision for Pacific?
- . (20 Points) Is the acquisition of High Country for stock a good financing decision? Will the acquisition solve Pacific’s financial problems and bring the company into compliance with the bank’s requirements without investing in the new television program? Is the company still in compliance if Pacific decides to produce and sponsor the television program?
6 . (15 Points) How are the opportunities presented in the case interrelated? What alternatives produce the maximum benefit to Pacific’s shareholders?