CALAVERAS VINEYARDS

 Calaveras Vineyards founded in the 1883 by Esteban Calaveras For the catholic Church.

 Situated the 220 Acres in the Alameda Valley, California.

 Calaveras vineyards changed the ownership structure.

 Improved the brand quality and market position with major improvements in the capital structure which was lead to

increase the sales price.

 New strategy consists of enrolling the west coast marketer Winston Fendall, who will provide them a new tool which

help to secure the cash flow statement due to the paying arrangement between the two organizations.
CALAVERAS PRODUCT CETEGORIES
 PROBLEM STATEMENT
• Anne Clemens , the senior president of Golden Gate Capital, is planning an investment proposal for loaning

the $4.5 million dollars to the Calaveras vineyards.

• In order to decide whether to agree with that proposal or not, Anne Clemens needs to determine the estimated

wealth of the Calaveras vineyards company and whether or not the senior financing proposal Is an attractive

deal to participate in.

CURRENT ANALYSIS BEFORE INVESTMENT
INTERPRETATION OF RATIO ANALYSIS
SOLVENCY RATIOS
• Quick ratio increased in the upper quartile by 1.2 times
• Current ratio increased by the 5.5 times
• Current liability to net worth and current liability to net worth ratio decreased by the 8.0% and 28.8%.

PROFITABILITY RATIOS
• ROA ratio increased by the 8.1%
• Return on sales ration increased by the 7.3%
• Net margin profit Increased By the 16.6%.
• Overall ration increased due to the sales improvement.
EFFICIENCY RATIO
• Collection to sales ration decreased in the upper quartile ratio by 29.2 days

• Assets to sales and accounts payable to sales ratio decreased by the 95.8% and 4.9%

• Sales on inventory ratio increased by 2.6%.

POST INVESTMENT FREE CASH FLOWS
(in thousands) 1994 1995 1996 1997 1998

DCF (141.9) 186.0 371.3 413.3 6,185.4

FCF COMPANY VALUE= $7.014 Million

FCF Total Assets value= $5.014 Millions ($7014-$2000)

BALANCE SHEET TOTAL ASSETS VALUE AT 1998 PROJECTIONS = 5.704 Million

As Compare to the FCF Value of the total assets the projected assets were valued at more than than 5 million dollars,

creating security for the investment of 4.122 Million by Golden Gate.

WEIGHTED AVERAGE COST OF
CAPITAL(WACC)
WACC% Risk free rate(%) Market Rate of Beta Value Tax Rate(%)
Return(%)

9% 5.85% 12.40% 1.17 37%

ASSUMPTIONS:

Market rate of return = Arithmetic mean of long term government bond in the small business.

Risk free rate= Interest rate of 30 years T-bonds

Beta Value= Average of competitors unlevered betas

 SENSITIVE ANALYSIS
1,994 1,995 1,996 1,997 1,998
COGS/Sales 59% 59% 59% 59% 58%
S,G&A exp/EBIT 56% 54% 54% 53% 53%
Change in
NWC/EBIT 70% 53% 52% 66% 85%
Capital
Expenditure/EBIT 27% 23% 20% 19% 18%

• The cogs/sales percentages shows that the less the company retain on each dollar of sales.if the company increase
the COGS by 40% it may be give 0% profit.
• Percentage of expense also decreased by 53%. Similarly if the company increase the expenses by 45% it may be give
0% revenue.
• Change in NWC increased by 85%, if company will decide to further increase by 30% to 40% the compnay definitely
get the 0% profit.
CONCLUSION
• Golden gate company should participate in the offered deal.
• $7014 million is the total value of company using the FCF that will
occur after the five year period.
• It shows that company has potential to generate more profits and
has the capability to payoff the debt obligations.
• According to the Equity investors Perspective, company has the ability
to pay dividend to equity holders.