Burton Sensors Incorporation Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Burton Sensors Incorporation Case Solution

Question: 2

The company should purchase the Thermo-well machines, as it generates a positive NPV of $961,970, with an IRR of 22% (See Appendix 1). The company’s WACC is 4.19%, which is less than the internal rate of return provided by the investment in Thermo-well machines.

Question: 3

Marshall should accept the offer of private equity investor and issue new stock of the company. Although it would cause a decrease in the share price due to a drastic decline in the Earning per share. As per the case analysis, in future, this offer would help the company in achieving its loan restrictions and Marshall’s leverage ratio target of 1:1. Targets would be fulfilled with normal growth rate, which means there wouldn’t be any aggressive growth rate. Moreover, it would help the company in attaining its growth strategy by providing the necessary funds.

Question: 4

The acquisition of Electro Engineering Inc. would generate a negative NPV of $2,383 with a negative internal rate return of 14% (See Appendix 2). So, the company should not acquire the Electro Engineering Inc. However, the most important consideration in analysis of this case is the company’s WACC and its IRR. Therefore, if the NPV of the acquisition is zero, still Marshal should not proceed,because the opportunity cost of taking risk of investing money is very high, but in the end, she might not gain nothing in return. In this situation,acquiring the Electro Engineering Inc. will give no benefit to the company in the long run and neither would be there any increase in the shareholders’ equity.

Question: 5

The effect of EE acquisition on the company would be that the company won’t be able to attain the benefit in their balance sheet or income statement. The company needs to make a certain investment to acquire EE.We observed in this case that the company has the ability to generate through equity financing. However, the financial calculations shows negative NPV and IRR of EE acquisition, which means that investing in that firm can result in the loss of shareholders’ wealth. It can impact the Marshall Company’s position in the market. Therefore,the company should focus on issuing new stock to the private investor in order to finance its growth strategy. Through applying this strategy; the company would be able to purchase thermometer well machines, which would provide numerous advantages to the company’s operations. It would help the company to gain a competitive advantage in the market..............................

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