Pure Foods Inc. Flawless Soup Proposal

Pure Foods Inc. Flawless Soup Proposal
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Pure Foods Inc. Flawless Soup Proposal
Most American citizens continue to suffer from diseases resulting from poverty-related unhealthy food choices. Health complications such as obesity and diabetes prevail due to people consuming higher amounts of sodium (salt) that the amount recommended by the health experts. Because Americans have a natural liking for processed canned foods, most of the market leaders for canned soup add significant amount of sodium that is far beyond the daily consumption limit. As a canned soup processing company, Kate wants to introduce “Flawless Soup” as a healthier option with zero sodium contents. So, this paper analyses the discounted cash flow for the Flawless Soup project to determine the future cash flows which will assist to verify the viability of the project.
From the market analysis, the company can produce and sell 600,000 cans of the zero-sodium soup monthly at a market price of $0.48 per can. Undoubtedly, this project would require Kate and the management team to adjust of the cash flows due to the substantial amount needed to commence the project. A realized projection shows that the company needs to procure ingredients and raw materials necessary for producing the Flawless Soup which is estimated at $0.18 per can. Before commencing the manufacturing process, the company needs to install new equipment worth $2.5 million, and could fully depreciate after ten years unless it is sold after five years of use. Furthermore, this project will lead to an increase in the labor costs, energy costs, the administrative expenses, and the selling expenses. Regardless, Kate needs to manage the existing products optimally as they mo...