Clean and Shine

Clean and Shine Inc.

Name of Student

Name if Institute

Date

$3 million Investment Decision

Clean and Shine Inc. (CSI) being the proposed investment opportunity by Koenig, with his extensive evaluations about different aspects, such as, marketing, finance, sales, profits, future expansions, etc. seems to be quiet attractive along with the fact that there is an ample margin of growth in car wash industry. However, the investment proposed initially is just $10.3 million which is to be financed by three partners, i.e. Koenig, Brown and Worthington.

Being one of the prospective shareholder, Koenig’s business friend, Worthington was to contribute $3 million investment in the CSI venture. But this needs some analysis and valuations in order to figure out whether the investment will be beneficial for Worthington or not.

If I were to be John Worthington, I would have evaluated the venture through its future profitability and the value of the business. Although, Koenig believes that moderately successful car wash businesses have sufficient gross margins within 60% to 90%, which can be very attractive. If Koenig’s plan is to work in reality, then this investment can be of high value to Worthington.

However, if we look at the financial data provided for the potential targets as well as the projected financial statements of CSI, the targeted companies are falling in the expected range of gross margins. Whereas, the projected statements show gross margins near to 50% (Exhibit 9), which do not represent the norm. Since, CSI will just start up as a new business, therefore, I cannot be directly compared with already established businesses.

Looking forward towards the Koenig’s plan about the future business plans, the investment of $3 million should be made in CSI. But keeping in mind that any failures in future might affect their business relations, which is unlikely as Koenig has already been a well-experienced entrepreneur.

Framework for Evaluating the Business...