McCormick & Company approached MCS because they would like to increase the production of their spice products and are considering the construction of a new factory in Largo, Maryland. The new factory would allow the company to increase its overall production capacity. As McCormick decides whether to build the factory, they are asking our finance team to evaluate options to finance this construction. McCormick has provided MCS with the purchase price, expected cash flow, and two new product lines projects they expect to run in the newly built factory.

McCormick & Company approached MCS because they would like to increase the production of their spice products and are considering the construction of a new factory in Largo, Maryland. The new factory would allow the company to increase its overall production capacity. As McCormick decides whether to build the factory, they are asking our finance team to evaluate options to finance this construction. McCormick has provided MCS with the purchase price, expected cash flow, and two new product lines projects they expect to run in the newly built factory.

To understand which financing option would be best for the client, you must first understand time value of money, present value, future value, and loan amortization. These topics will help you make recommendations about the relative benefits and drawbacks of each option.

Working in the attached Excel Workbook, complete the Financing and Investing worksheet. The Financing and Investing worksheet contains information about present value, revenue, expenses, and cash flows, as well as questions that will help Frank guide the client in selecting the best financing option.

Working with the same Project 4 Excel Workbook you worked with in Step 1, complete the Valuation of Performance worksheet. This worksheet contains information on McCormick’s dividends, stocks, and risk premiums, as well as questions that will guide the client’s decisions.

As McCormick & Company reviews its capital in preparation for constructing the factory, it has asked MCS to help with the process of selecting the best retirement options for their employees. To help McCormick make the best decision based on our recommendations, you will need to understand several concepts:

• annuities
• stocks
• bonds
• standard deviation
• internal rate of return
• risk-free rate of return
• treasury bill rate

You will also apply what you learned about present value and future value.

Working with the same Project 4 Excel Workbook you used in Steps 1 and 2, complete the Annuities worksheet. The worksheet poses questions about the retirement annuities, US treasury bond rates for the employees’ portfolios managed by a retirement fund company, and annuities for employee’s personal investments. This information will clarify the best choice of retirement plan for McCormick employees.

As McCormick decides whether they will invest in an additional factory to keep up with demand, the company remains uncertain if the investment will yield worthwhile returns. “That is where they need us to provide them with a risk and return evaluation,” Frank says. “Risk is the financial liability a company takes in a given investment in consideration of a potential return on the investment.”