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Rate of Return
Kraft’s average Rate of Return between September 2002 and September 2012 was .53%. This is less than its competitors. Heinz fared slightly better with an average annual return of .83%. Unilever fared the best with an average annual return of .99%. Compared to these two competitors, Kraft did not do as well as it possibly could have. All three of the companies have a wide breadth of product offerings which allows for a diverse business to balance the risk. One possibility for the difference is that since mid-2011 Kraft has been preparing to split into 2 divisions and possibly not focusing on growth until the split on October 6, 2012. This will be further discussed below. Possibly once Kraft splits it will be more competitive with its rate of return.
Expected Rate of Return
Kraft’s Rate of Return in previous years has not been terrible, its Expected Rate of Return is competitive with its competitors. To calculate the Expected Rate of Return I determined a “Worst Case, “Normal Case,” and “Best Case” scenarios. “Worst Case” is all returns less than 2% between September 2002 and September 2012. “Normal Case” is all returns between 2% and 8% for the same time period. Last, “Best Case” is all returns above 8% for the same time period. (See appendix). These values were chosen based on the average being .994% and an optimistic return would be around 2% for “Normal.” Once all the returns were sorted in the above scenarios, the average return was calculated. The probabilities of the returns occurring out of the 120 points were then used to determine the Expected Rate of Return.
Of the three companies, Kraft has the worst Expected Rate of Return of 6.57%. This is most likely due to its larger percentage of probability in the “Worst Case” scenario and its lower Rate of Return. Next was Heinz with 10.4% and Unilever with 12.6%.
Variance, Standard Deviation, and Coefficient of Variation
Once the Expected Rate of Return was calculated,...
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