Calaveras Vineyards Questions

Calaveras Vineyards

Finance 621

Graded Case #2

DUE WEDNESDAY JUNE 1, 2011

Please address the following:

1. What is the value of Calaveras Vineyards? Is the proposed purchase price for Calaveras Vineyards appropriate?

a. Prepare a discounted cash flow valuation of Calaveras, using the spreadsheet provided and your estimate of Calaveras’ weighted average cost of capital. Do you have any concerns about the stability of the listed “pure-play” comparable companies? Might these concerns bias your estimate in any direction? Perform a sensitivity analysis on assumptions that you suspect to be “key value drivers”. What are the insights you derive from this analysis?

b. Consider other methods of estimating Calaveras’ value, including book , liquidation, and multiple methods.

2. Would Calaveras be a worthy borrower? What are the principal risk factors in this prospective credit? Can Calaveras adequately service the proposed amount of debt? What other considerations might influence your evaluation of this firm as a prospective borrower?

3. What should Anne Clemens do? Prepare a recommendation for action by Goldengate Capital. If you are inclined to participate in the loan, identify any issues that will warrant careful continued monitoring. If you are not inclined to participate on the terms as outlined in the case, then prepare a counter-proposal to NationsBank indicating terms on which you would be willing to participate.

You should prepare your numerical analysis in Excel. Please limit your write-up to four (3) pages, excluding exhibits. You may again work in groups of up to 3 people.