Mini Case 1

Repeat the analysis performed in the previous question but now assume that Hatfield is able to improve the following inputs: (1) Reduce operating costs (excluding depreciation) to sales to 89.5% at a cost of $40 million. (2) Reduce inventories/ sales to 16% at a cost of$10 million. This is the Improve scenario.

(1) Should Hatfield implement the plans? How much value would they add to the company?

(2) How much can Hatfield pay as a specialdividend in the Improve scenario? What else might hatfield do with the financing surplus?