The Star River Case

2023-05-13 04:53:36

Background: This incident relates to how Star River and the company are facing the financial crisis caused by rapid growth. The CEO basically wants to improve the financial situation of the company and ask for help to make some decisions. The CEO will review analysts' historical experience, predict funds demand over the next two years, use predictive models to determine key factors for assumptions, estimate Galaxy's weighted average cost of capital, and at the end I asked him to analyze investment recommendations for packaging machinery.

Introduction Star River Electronics is a joint venture between Starlight Electronics Ltd. in the UK and New Era Partners, an Asian venture capital company. Star River Electronics is headquartered in Singapore. We manufacture CD-ROMs for major software companies. Star River has earned high acclaim in the industry by manufacturing high quality discs. Despite the increase in sales, unit price declined due to price competition and growing popularity of alternative storage devices (mainly DVD).

Star river needs to tackle some problems with the recent CEO's resignation. Digital video discs are expected to enter the CD-ROM market in the near future, and only 5% of sales are from this field. Star River needs capital investment to increase capacity in this area. To pay for this fee, they can use debt or capital. In addition, a new packaging machine has been proposed to reduce personnel and administrative expenses, Star River knows whether to approve purchase now or wait three years, purchase new equipment to handle the expected growth rate It was necessary. Finally, we need to estimate the company's weighted average cost of capital. This will help answer the question of waiting or purchasing this device now.