Calaveras

Financial Statement Analysis & Valuation

You are required to complete and answer the Calaveras Vineyards Case which you are required to download separately as a pdf file.

Suggested Questions for Case Study

Calaveras Vineyards

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

2. Prepare a discounted cash flow valuation of Calaveras using the attached supplemental exhibit. Ensure that you offer a critical assessment of the assumptions used to estimate future cash flows. Which cash flows would you change and why? What value would you place on the firm based on your estimates?

3. What is your estimate of Calaveras’s weighted average cost of capital. Do you have any concerns about the suitability of the listed “pure-play” comparable companies? Might these concerns bias your estimate of value in any direction? [Note: Please see the attached exhibit which offers estimates of the cost of capital for the comparable firms.]

4. Consider other methods of estimating Calaveras’s value including book, liquidation, and multiples methods.

5. Would Calaveras be a creditworthy 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?

6. What should Anne Clemmens 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 counterproposal to NationsBank indicating terms on which you would be willing to participate.

7. If you had to pick a single number to estimate the value of Calaveras (before the loan is made, but anticipating whatever future you envision for the firm) what would that number be?