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1. Assume that you are a member of Hershey Trust Board. To whom (or what) do you owe your fiduciary responsibility? How does the legacy of Milton S. Hershey affect your thinking as a member of the board? 2. Is the diversification a valid reason to sell HFC? How would such diversification have served the Hershey School 10 years earlier, for example? 3. Based on your valuation of HFC, do you believe the company was fairly valued by the market before the announcement of the sale? Are the Nestle-Cadbury Schweppes and Wrigley bids fair to their own shareholders (i.e. what needs to happen for these bids to create value for the bidding companies)? (Hint: Use a discount rate of 7.5% for your analysis of HFC’s value) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 NOPAT 386.3 433.2 483.9 508.1 533.5 560.1 588.1 617.5 648.4 680.8 NPPE 202.6 86.9 91.2 95.8 100.6 105.6 110.9 116.4 122.2 128.4 NWC 90.5 32.6 34.2 35.9 37.7 39.6 41.6 43.7 45.8 48.1 FCF 93.2 313.7 358.5 376.4 395.2 414.9 435.6 457.4 480.4 504.3 Terminal Value 21,180.60 Total 93.2 313.7 358.5 376.4 395.2 414.9 435.6 457.4 480.4 21,684.9 0.9302 0.8653 0.8050 0.7488 0.6966 0.6480 0.6028 0.5607 0.5216 0.5 DCF 86.7 271.5 288.6 281.8 275.3 268.8 262.6 256.5 250.6 10,521.4 NPV 12,763.7 4. Which, if any, bid would you vote to accept for the purchase of Hershey Foods Corporation? Is your decision primarily based on the economics of the bids or the desire to honor the legacy of Milton S. Hershey? 5. WRIGLEY’S VIEW 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 After Merger Sales 4,387.91 4,653.82 4,935.84 5,234.96 5,552.19 5,888.66 6,245.51 6,623.99 7,025.40 7,451.14 After Merger Cost of Sales 2,566.93 2,675.95 2,788.75 2,957.75 3,136.99 3,327.09 3,528.71 3,742.55 3,969.35 4,209.89 After Merger SG&A Costs 1,175.96 1,247.22 1,322.81 1,402.97 1,487.99 1,578.16 1,673.80 1,775.23 1,882.81 1,996.91 NOPAT 1,390.97 1,428.73 1,465.94 1,554.78 1,649.00 1,748.93 1,854.91 1,967.32 2,086.54 2,212.98 NPPE 202.64 86.88 91.22 95.78 100.60 105.60 110.88 116.42 122.24 128.40 NWC 90.53 32.58 34.21 35.92 37.70 39.60 41.58 43.66 45.84 48.13 FCF 97.07 322.59 373.26 397.21 1,510.70 449.76 478.56 509.17 541.72 576.34 Terminal Value 24,206.28 Total 97.07 322.59 373.26 397.21 1,510.70 449.76 478.56 509.17 541.72 24,782.62 0.93 0.87 0.80 0.75 0.70 0.65 0.60 0.56 0.52 0.49 DCF 90.30 279.15 300.46 297.43 1,052.29 291.43 288.45 285.49 282.55 12,024.38 NPV 15,191.93 NESTLE AND CADBURY-SCWHEPPE’S VIEW 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 After Merger Sales 4,344.1 4,561.3 4,789.3 5,028.8 5,280.2 5,544.2 5,821.5 6,112.5 6,418.2 6,739.1 After Merger Cost of Sales 2,439.6 2,517.8 2,597.7 2,727.6 2,864.0 3,007.2 3,157.6 3,315.4 3,481.2 3,655.3 After Merger SG&A Costs 1,117.6 1,173.5 1,232.2 1,293.8 1,358.5 1,426.4 1,497.7 1,572.6 1,651.3 1,733.8 NOPAT 476.0 526.3 580.4 609.5 639.9 671.9 705.5 740.8 777.8 816.7 NPPE 202.6 86.9 91.2 95.8 100.6 105.6 110.9 116.4 122.2 128.4 NWC 651.6 684.2 718.4 754.3 792.0 831.6 873.2 916.8 962.7 1,010.8 FCF 182.8 406.8 455.0 477.8 501.6 526.7 553.1 580.7 609.8 640.2 Terminal Value 26,888.4 Total 182.8 406.8 455.0 477.8 501.6 526.7 553.1 580.7 609.8 27,528.6 0.93023 0.86533 0.80496 0.74880 0.69656 0.64796 0.60275 0.56070 0.52158 0.48519 DCF 170.0 352.0 366.3 357.8 349.4 341.3 333.4 325.6 318.1 13,356.7 NPV 16,270.5 6. If you decide to reject both bids and not sell HFC, what will you do to achieve the diversification objective? If you decide to accept one of the bids, what (if anything) would you want to communicate to the constituents who opposed the sale?

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1. Being a member of the Trust Board created by Mr. Milton S. Hershey, it is of my primary obligation, as chartered, to provide educational and cultural opportunities to the residents of Derry Township. Milton and Catherine Hershey created the deed of trust that chartered the school (Milton Hershey School) with its purpose to provide quality education and train the young ones to useful trades and occupations for them to create and earn their own livelihood in the future. My duties arise from terms specifically stated in the trust document created and legally established fiduciary duties. It is my task to safeguard the beneficiary from mismanagement or misappropriation of assets by abiding my duties of obedience, loyalty, and care. Even if there was a clear cut purpose for the creation of the trust, I still have to consider the whole purpose of Hershey Trust and underlying reason of its establishment....
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