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1 – 6 of 6Bartholemew Kenner, Dayton M. Lambert, Carlos Omar Trejo-Pech, Jada M. Thompson and Thomas Gill
The purpose of this paper is to determine the stochastic net present value (NPV) of a model smallholder poultry operation in Rwanda under production and market uncertainty.
Abstract
Purpose
The purpose of this paper is to determine the stochastic net present value (NPV) of a model smallholder poultry operation in Rwanda under production and market uncertainty.
Design/methodology/approach
A discounted cash flow calculator was used to determine the NPV of operator investments and operating cash flows, including time, materials and capital. Broiler production data, market prices and variable input costs were collected from 125 smallholder operations in the Musanze District, Rwanda. These data were combined with a historical price index tracking the inflation rate of Rwanda’s currency. Policies including overstocking, technical support repayment scheduling, selling broilers at a spot market price, using marketing contracts and selling poultry manure were compared using non-parametric paired comparisons and stochastic dominance.
Findings
Risk-neutral and risk-averse producers would prefer overstocking, delaying repayment of technical support services and selling manure to status quo operational policy. No differences were observed between the option to sell birds at spot market prices or through contracts.
Research limitations/implications
This analysis demonstrates how individual managerial or an intervention in smallholder broiler production affects financial performance.
Practical implications
To mitigate risk associated with this novel enterprise, producers should consider overstocking birds. If local markets for manure were developed, the risks faced by new or beginning poultry operators could be mitigated.
Originality/value
A stochastic, discounted cash flow model calculator was used to determine the NPV and discounted payback period of operator investments and operating cash flows, including time, materials and capital.
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Carlos Omar Trejo-Pech and Susan White
This case was primarily researched using academic research papers, industry reports (Egg Industry Center and others), and finance databases including Standard and Poor’s Capital…
Abstract
Research methodology
This case was primarily researched using academic research papers, industry reports (Egg Industry Center and others), and finance databases including Standard and Poor’s Capital IQ. Regarding the cost and investment budgets, the case relies mainly on an experiment conducted by the Coalition for Sustainable Egg Supply, updated by the authors of this case.
Case overview/synopsis
Eggs produced by cage-free birds, while more expensive than conventionally produced eggs, are gaining in popularity among consumers who want only eggs that are produced more humanely. A number of major distributors, including Whole Foods, McDonalds and Starbucks have pledged to sell only cage-free produced eggs by 2025. Several states including California, Oregon and Michigan have passed laws limiting conventional egg production. The case provides costs and industry information and needed to project free cash flows and risk-adjusted opportunity cost of capital and perform break-even capital budgeting analysis of the two egg production alternatives.
Complexity academic level
This case is appropriate for graduate corporate finance courses. It is particularly appropriate for agribusiness finance courses. A preliminary exercise was used during the fall 2018 in a land grant university, just after the “Prevention of Cruelty to Farm Animals Act,” also known as Proposition 12, was passed in California in favor of cage-free egg production. The exercise was revised and used in the fall 2019 in the same class. This extended version of the case, was classroom tested in the fall 2020 in an agribusiness finance graduate class, with agricultural economics and business students enrolled.
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Carlos Omar Trejo-Pech, Susan White and Magdy Noguera
Controladora Comercial Mexicana, a Mexican retailer, had successfully managed the bankruptcy process and was ready to emerge from its problems, primarily caused by speculation and…
Abstract
Synopsis
Controladora Comercial Mexicana, a Mexican retailer, had successfully managed the bankruptcy process and was ready to emerge from its problems, primarily caused by speculation and excessive debt, and begin operations anew. Was the restructured Comerci capable of regaining its position as a premier retailer, and more importantly, was the firm capable of repaying the high level of debt that it carried following bankruptcy reorganization? How strong was the reorganized firm? Had Comerci truly left its problems behind in bankruptcy court, or would history repeat itself? How could Comerci raise funds needed for growth – through additional debt? Though asset sales?
Research methodology
This case was researched using publicly available information, including the company's financial statements, bankruptcy filings, news stories about the bankruptcy and financial data bases (e.g. ISI Emerging Markets, Economática, Capital IQ, etc.) to obtain information about the competitors and from financial analysts.
Relevant courses and levels
This case is intended for advanced undergraduate or MBA electives in finance. Students should have a basic understanding of valuation and financing before attempting this case. The case could also be used in a corporate finance or banking class to illustrate bankruptcy and credit risk, or could be used in an international business class to illustrate the differences between USA and international bankruptcies.
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Carlos Omar Trejo‐Pech, Richard N. Weldon and Lisa A. House
This study examines empirical relationships of earnings, accruals, and cash flows for the U.S. food supply chain sector (i.e., agribusiness) and compares them with results for the…
Abstract
This study examines empirical relationships of earnings, accruals, and cash flows for the U.S. food supply chain sector (i.e., agribusiness) and compares them with results for the complete U.S. market. In addition, we evaluate earnings before interest, taxes, depreciation, and amortization (EBITDA) as a potential proxy for cash flow. Empirical results show that while earnings and accruals are systematically positively related, accruals and cash flows are systematically negatively related. Moreover, both the magnitude and the behavior of EBITDA across different levels of cash flows for agribusinesses do not mimic cash flows. Thus, this metric is not a valid proxy for cash flow in accrual research studies.
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Luis Raúl Rodríguez-Reyes, Carlos Omar Trejo-Pech and Mireya Pasillas-Torres
The Mexican housing industry was hindered by a shrinking market and tighter financial conditions related to the Great Recession. Moreover, in 2013, a major change in public policy…
Abstract
Purpose
The Mexican housing industry was hindered by a shrinking market and tighter financial conditions related to the Great Recession. Moreover, in 2013, a major change in public policy further modified this industry’s environment. Mexico’s new urban development policy supported inner-city new housing, in contrast to the previous policy that incentivized sprawling. Three out of eight publicly traded housing companies filed for bankruptcy protection in 2013-2014, arguably because of the effects of the Great Recession and the new housing policy. The purpose of this study is to identify firm-level factors that caused some firms to file for bankruptcy protection.
Design/methodology/approach
Three approaches were used to analyze the housing industry in Mexico from 2006 to 2015. First, a policy analysis focused on the new housing policy and its consequences for housebuilding companies. Second, a financial analysis of the two economic shocks was performed in search for the transmission mechanisms in the companies’ financial metrics. Third, a retrospective analysis using the Fisher’s exact test was used to identify variables statistically associated with companies filing for bankruptcy protection.
Findings
There are two features significantly associated with bankruptcy protection: increasing market share while being vertically integrated, as a response to the Great Recession, and the relative magnitude of the loss on firms’ inventory value due to the new public policy. Neither Altman’s Z-score values nor firm size or degree of integration are significantly related to bankruptcy.
Research limitations/implications
The small sample size presented a challenge, as most statistical methodologies require large samples; however, this was overcome by using the Fisher’s exact test.
Originality/value
The main contribution of this paper is the statistical identification of the possible causes for bankruptcy protection in Mexico amongst homebuilding firms in 2013 and 2014, which have not previously been reported in the literature.
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