Egret Printing Company

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Case Overview

Egret Printing and Publishing Company is a family owned speciality printing business. It was founded by John and Keith Belford in 1956 after they were discharged from the US Army. Patrick Hill who is the son in law of Keith Belford joined the firm in 1979 in the Accounting Department. He was promoted as a treasurer in 1988 and then as the Vice-President of Finance in 1994. His main responsibility was to look after both, the internal and external financial operations, but more importantly the internal ones. John and Keith Belford are said to possess nature that is of extreme conservatism and this was due to the fact that their father had suffered a great deal under a crushing burden of debt during the Great Depression of the 1930’s.And it was because of this that the Belford brothers vowed never to get deeply into debt.
However, Hill currently is busy carrying out a detailed analysis of four major capital investment proposals that the Belfords have identified as possible candidates for funding in the coming year. A description of each of the four projects is also given that includes information such as the costs and expected after-tax cash flows(net income plus depreciation).All of the four projects are considered to be equally risky and their risk is about the same as that of the company’s other assets.

PROJECT A: Major Plant Expansion
The company operates mainly as a full-range printer of high quality; four colours offset advertising materials, calendars, speciality tabloids, business printing and some books. Competition that exists in their market segment is based more on quality of the finished goods and rapid delivery on short notice than on the price of the various services. The volume of orders filled each month has been rising steadily over the past five years, and all indications point to a continuation or even an acceleration of this trend. Egret recently has lost several sizable...