Malakoff Valley Farm, Inc. (MVF) is a legacy dairy farm located in Iowa. It started out as a small farm in the late 1800s and is now being run by the familys fourth generation. Through various consolidations of surrounding farms, MVF has become a large dairy farm with 4,000 cows, black and white Holsteins, fawn-colored jerseys, along with mottled crossbreeds of the two. The Malakoff family takes a lot of pride in their farm and cares for their animals greatly.

MVF is currently relying on equipment and aging technology that has been partly acquired via farm consolidations over the years. MVFs CEO, Scott Malakoff, has decided that it was time for the farm to rely more on technology and to update some of the equipment used on the farm. Based on his knowledge of the milk industry in Iowa, the CEO has determined that he needs to grow MVF to $15 million in annual sales in order to be able to compete with the top 10 farms. He does not want to add cows to his farm at this point, and he is acutely aware that MVF cannot continue to grow and remain profitable if he does not authorize some capital spending. Scott Malakoff is willing to consider approving around $8-10 million in capital spending. He has not yet decided how the capital expenditures will be funded, but he understands that a combination of external financing and additional paid-in capital may be needed.

Scott Malakoff has asked his executive team to research and propose capital expenditure projects that would significantly improve their respective department, increase sales and create the most value for the dairy farm. His executive team consists of:

Ryan Malakoff, Operating Officer

Justin Malakoff, Livestock Feeding Manager

Chris Cornwall, Milking and Storing Manager

Janet Ulrich, Pasture Manager

Adbul Ben-Abbes, Herd Health, and Reproduction Manager

After many strategic meetings, several projects were identified as making the most sense for MVF to invest in. Your services have been retained to conduct an analysis of the proposed projects and formulate a proposal that will create the most value for MVF.MVF has a 21% corporate tax rate and a required rate of return of 12%.

1) Calculate the CFFA, CFS, and CFC, the Internal Growth Rate, and the sustainable Growth Rate for MVF based on the latest financial statements available. Based on your calculations, address whether an internal growth or sustainable growth strategy is a viable option for MVF at this time.

2) Review and analyze each proposed investment, using NPV and IRR. Show your work: set up a detailed cash flow table showing CFFA by year. Recommendation: use Excel to run your NPV/IRR and copy/insert Excel objects into your Word document.

Malakoff Income Statement in '000s of $ $ Sales CGS Depreciation Gross Income 2020 11,201 $ 7,619 211 3,371 2021 11,289 7,657 219 3,413 SG&A Other Expenses EBIT Interest Income Tax Net Income 3,080 102 189 23 3,194 75 144 28 85 81 $ 18 98 $ $ Malakoff Balance Sheet in '000s of $ 2021 224 $ 2020 253 $ 71 291 983 Cash ST Investments Accounts Receivale Inventory 79 237 901 Buildings and Structures Machinery and Equipment Net Fixed Assets 1,660 1,192 2,852 1,753 923 2,676 Intangible Assets 679 679 Total Assets "$ 5,129'$ 4,796 Liabilities 456 Liabilities A/P Income Tax Payable Other Current Liabilities ST Debt 35 528 59 15 370 143 203 LTD 1,595 1393 Equity Common Stock Add'l Paid In Capital Retained Earnings 375 531 1656 375 458 1733) Liabilities and Equity $ 5,129 $ 4,796 Malakoff Income Statement in '000s of $ $ Sales CGS Depreciation Gross Income 2020 11,201 $ 7,619 211 3,371 2021 11,289 7,657 219 3,413 SG&A Other Expenses EBIT Interest Income Tax Net Income 3,080 102 189 23 3,194 75 144 28 85 81 $ 18 98 $ $ Malakoff Balance Sheet in '000s of $ 2021 224 $ 2020 253 $ 71 291 983 Cash ST Investments Accounts Receivale Inventory 79 237 901 Buildings and Structures Machinery and Equipment Net Fixed Assets 1,660 1,192 2,852 1,753 923 2,676 Intangible Assets 679 679 Total Assets "$ 5,129'$ 4,796 Liabilities 456 Liabilities A/P Income Tax Payable Other Current Liabilities ST Debt 35 528 59 15 370 143 203 LTD 1,595 1393 Equity Common Stock Add'l Paid In Capital Retained Earnings 375 531 1656 375 458 1733) Liabilities and Equity $ 5,129 $ 4,796