Critical Financial Problems

Q1. Why is Van Murr asking for control of Chestnut Foods?

 Van Murr bought the 10% stock of Chestnut Foods.
 Van murr is putting pressure on the management to sell the Instruments division and
asking only to operate with food division.
 As per Van Murr, Chestnut Foods’s specialty is of manufacturing frozen foods, so
they need to put the whole focus on the foods division instead of keeping multiple
business verticle.
 The management can preserve his comment by saying that Van Murr is only trying to
focus on short term gains just because of his stocks in the company.
 He is also trying to influencing other stakeholders to poll for his favor so that he can
gain the most from this disinvestment.

Q2. Can we agree with Meyer’s Dinner conversations?

 This conversation happened between Suchecki(VP of Instruments) and Claire
Meyer(VP of Foods).
 Meyer was thinking of using different hurdle rates for two separate divisions.
 It was more focused on the company's hurdle rate.
 On the other hand, Suchecki believed in same or single hurdle rate for both the
divisions.

But ultimately we have agreed with Meyer’s separate hurdle rates. Reasons have proposed
below.

 When there is a high-risk project, we shouldn’t put all our invest there itself it or
overinvest it in other words.
 Food division has a low-risk portfolio.

Q3. Can we support Pederson's decision to resolve the conflict?

Pederson's suggestion seems to be correct here because the revenue of the instruments
department is increasing at a strong rate and the profitability of the division in also much
higher than foods division.
Q4. What are the recommendations of Pederson?
 Make Mr. Van Murr understand about investing in the long term.
 Convince Mr. Van Murr not to sell off Instruments division.
 Request Van Murr to fund the $1 billion investment.

Q5. What are the wholistic characteristics of the two divisions Food &
Instrument?
The food products division supplied a long-range of packaged and frozen products mainly
inclined to bakery throughout the USA. Revenues for this division was stable; the company
accomplished an average growth rate of 2% from 2010 till 2013. Instead of multiple efforts to
expand this unit but the sale remains mostly constant. Bread and Pretzel were the main
drivers of growth in this segment. However, customer feedbacks were constantly high for
product quality, freshness, and flavor.
On the other hand Instruments division showed steady growth from its inception.
20% of the division’s growth came from internally from the Chestnut’s product division.
Demand was being forecasted mainly from abroad, but it will require substantial investments
in Research & Development and fixed assets.