Evaluate the Company

1. Evaluate the company. How much do you believe it is worth? Bring to class a written bid showing how much you would pay for it if you were Scott and Peterson.

I believe the company is worth for at maximum about one million dollars. From the exhibit showed in the case, though the historical performance of the company in the last four years were steadily increasing and the profit after tax was also face an increased situation as well, the inside management problem between the manager’ team was a big concern when I evaluate the company for its foreseen future. The valuation I use is the one that mentioned in the case. Private manufacturing companies were typically valued at 5-10 times after-tax earnings. The net earnings in the most recently year 2005 is $144,011 dollars which is shown in exhibit A. Therefore I use that number to multiply 5-10 and get a relative range of the valuation of the company. The result turns out be 720 thousand dollars to 1.44 million dollars. As I mentioned at the beginning, the conflicts between Scott and Peterson will be a big problem to the valuation. If they could figure out the problems, the company may have a brighter future and the growth potential may increase since they already decided to go nationally. However, if the problem cannot be solved and the conflicts become more and more unignorably, it may decrease the valuation of the firm.

2. What should they do to resolve the ownership situation?

I think the best way is for them to have a deep talk. At the end of the case, Scott agreed to meet with Peterson. This is a good signal for both of them, because in pervious content mentioned in the case, Scott was unwilling to discuss the conflicts between him and Peterson. Scott now should talk with Peterson in peace, and tell Peterson what suggestions he have for solving the problem for the company and for the management style difference. On the other hand, Peterson have taken serious valuation and discuss the valuation with the...