# Hill Country Snack Foods Co. Essay examples

1831 Words Oct 25th, 2013 8 Pages
Assignment for Corporate Finance
Assignment

Major
:

Group
:

Name
:

1 i) How much business risk does Hill Country face?
Hill Country Snack Foods Company manufactures, markets, and distributes snack foods and frozen treats throughout the United States. Hill Country is overall well performed company. Sales, Net Income, ROE and ROA had increased at a steady rate. Company mainly focused on maximizing the shareholder value by the CEO and other management’s managerial philosophy. Currently, Hill Country uses a risk adverse strategy to choose their business or project. Hill Country’s industry is high competitive but it kept going well with cost efficiency and
Our group recommends the second alternative using 40% leverage ratio among three alternatives. ii) Why?
By MM proposition 2 with corporate tax, the result of each WACCs is like bellows : [ Table ] Calculation of cost of capital in each structure

No debt
20% debt
40% debt
60% debt
RE
6.91%
7.57%
7.99%
6.15%
RD
-
2.85%
4.40%
7.70%
RWACC
6.91%
6.42%
5.93%
5.44%
*Equation for Ro = EBIT x (1 - Tc) / Vu = 151.30 x (1-0.35) / 1,141.92(mil)
*Equation for RE = Ro + (1 - Tc) x (Ro - RD) x D/E
*Firm Value (Vu) : Current Market Price \$41.67 x Common shares outstanding 33.8844(mil)
From above table, capital structure with 60% debt shows the lowest WACC, 5.44%. With this result, the optimal capital structure may seem to be the use of 60% debt, but we think it’s not optimal in aspect of shareholder’s value and credit rating in market. So, we choose the use of 40% debt with the second lowest WACC as the optimal capital structure.
- Improvement of shareholder’s value : maximum EPS and DPS
At 40% debt-to-capital ratio, company shows the maximum EPS and DPS. Although total amount of net income and dividends decrease, earnings and dividends per one share become maximized by the use of debt. Eventually, stock price is also expected to increase when we consider present break-even PER. In addition, stock repurchase premium (by use of all debts) contributes to some shareholder’s capital gain.
- Maintaining a proper Credit rating in Investment

## Related Documents

• ###### Hill Country Essay

Hill Country Snack Food Co is experiencing steady growth and success due to its effective operations and quality products in its industry. It has unique capital structure with zero debt and large cash balance corresponding to its conservative operation strategy and corporate culture and philosophy. Whether to change to a more aggressive capital strategy and what is the optimal level of debt-to-capital ratio for Hill Country is the key issue in this case. * Hill Country’s operation strategy…

Words: 642 - Pages: 3
• ###### Essay on Snack Food Industry

for the snack food industry, I first looked at competition from rival sellers as I felt that this was the strongest threat for manufacturers. Rival sellers can easily try to produce a new line of products, mimic a competitor’s product, and it’s difficult to differentiate a snack food from the competition as there is so much competition. The market isn’t quickly growing, so rivals are competing for the same customer base and there is very little if any cost to switch from one snack food to the next…

Words: 691 - Pages: 3
• ###### Essay Fast Food And Snack Companies

Many college students around the country can agree that when you are in a rush and hungry there just are not many options but to eat a snack or fast food. Usually these snacks or fast food options you choose may not offer the most nutritional value for your body but at that given moment of time it is tough to say no to these unhealthy options because you really do not have a choice. I used to be the perfect example of this type of person who just did not care if I eat something unhealthy during…

Words: 2476 - Pages: 10
• ###### Essay Benefits Of A Tax On Snack Foods

Adding a tax on snack foods will also help stop the overconsumption of such junk foods. According to Frack, snack consumption is one of the reasons people have increased their calorie intake. Adding a tax on snacks may be the most effective and "...a snack tax is most legislatively feasible" (Franck 1950). With that said, the legislative branch will most likely agree with a tax act on snack foods. This too creates problems though. "...a snack tax alone might be ineffective in addressing the obesity…

Words: 1170 - Pages: 5
• ###### Essay Analysis Of Hill Country Snack Foods

Hill Country Snack Foods was founded in Austin, Texas and provides affordable good quality snack foods with a southwestern flare to its consumers. Hill Country distributes product to supermarkets, grocery stores, schools and sporting events. This snack food is in competition with PepsiCo and other smaller snack food brands such as Snyder- Lance (Stephenson, 2012, pg.1). Hill Country is a risk-adverse company with a strong balance sheet, the company has zero debt and works hard to keep its shareholders…

Words: 850 - Pages: 4
• ###### Essay Midnight Snacks Food Truck Industry

Midnight Snacks food truck can be a late-night dream for people who typically work between 10:00 p.m. and 6:00 a.m. Night owls and overnight, third-shift workers, often lack access to fresh meals that are available in regular, or fast food, restaurants during the day. After a thorough analysis of the local food truck industry, and the Peoria-area census data, it appears that the Midnight Snack food truck business could be fruitful and fill a current market gap. This section of the business plan…

Words: 1527 - Pages: 7
• ###### Essay Using Not A Bag Of Snack Food

labeled amount is false due to the amount of empty space inside. Thus, the goal of this paper is to explore this idea and document the experimentation that follows in order to find out whether or not a bag of snack food contains its labeled amount. To begin with, the air inside packaged snack bags is important for preserving the product. The air inside the bag acts as a cushion, so that the product inside is not crushed. This is critical for when bags are tightly placed into boxes, which then deal…

Words: 1229 - Pages: 5
• ###### Essay Types Of Snacks And Junk Food

There are many types of snacks. There are nutritional snacks and there are non-nutritional snacks, also known as junk food. There is a fine line separating these classifications; big portions of nutritional food can prove to be unhealthy and small portions of junk food can be considered healthy. Disregarding these classifications differences, they share the same categories. Nutritional snacks and junk foods come in three distinct flavors: sweet, salty, or spicy. Leading a healthy lifestyle can be…

Words: 811 - Pages: 4
• ###### Essay Food At The York Hill Cafeteria

the fruits that the cafeteria has, but can still make a great smoothie. Before going to sporting events, she wants food that is normally served at sports bars to be served at the York Hill cafeteria. I believe that she wants to feel that atmosphere of the Sports bar while she is eating her food at the cafeteria before the game. She could have great memories of eating that type of food with her family before going to a football game back home. When she goes to Eli’s, she can drink and have more fun…

Words: 2655 - Pages: 11
• ###### Essay Quality Of Food : Snacks And Meals For Recipients

quality of food; snacks and meals for recipients (Blumenthal, et al. 2013). States have an option whether to participate in the federally subsidized food programs (Blumenthal, et al. 2013). Currently, all states participate in the program (Blumenthal, et al. 2013). All of the federally funded programs, WIC, SNAP and the school food program, encourage improvement of the nutritional quality of food; snacks and meals (Blumenthal, et al. 2013; Owens, et al. 2015; and Wetherill, et al. 2015). HEALTHIER…

Words: 758 - Pages: 4