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In 1967 General Foods Corporation was a large, quickly growing corporation and they were actively looking for new projects in which they could invest their capital in. They were looking to increase their share of the dessert market. Currently the company is studying a proposal of whether or not to accept a new project for producing instant dessert (Super project), among many other projects. Some other major products from General Foods included Post, Kool-Aid, Maxwell House Coffee, Jell-O and Birds Eye. The financial analyst for the company, Mr. Sanberg, was interested in the Super project because the market for powdered desserts has showed noticeable growth compared with other desserts in the market. The market share for the powdered desserts had increased by 7.6 from 1965 to 1966. This growth in the market was one of the reasons that the company felt it was important to perform a capital budgeting analysis on the Super project in order to be aware of the consequences of the project.
The company had established financial policies and procedures for evaluating all new capital projects requesting greater than $50,000 in capital. Therefore, new projects would be examined in order to determine how they will increase the profit, improve the quality, and increase the capacity of the production process for the new product and existing products. For this reason, the controller of the corporation, Mr. Kresslin, was concerned about the aggregate benefits that the corporation would obtain by performing the Super project.
The original request for the Super project was $200,000 which would be used for purchasing new packaging equipment and building space for ...