Calaveras Vineyards Essay

The goal of this analysis is to determine if Goldengate Capital should participate in a $4.5 one thousand thousand management acquisition of Calaveras Vineyards. Located in Alameda Valley, California, Calaveras Vineyards sits on 220 landed estate, consisting of 175 acres of vineyards, and 45 acres of equipment sheds, a winery building, and a small farmhouse with guestrooms, offices, and gross sales room.St regularizegic AnalysisSWOT AnalysisFinancial Analysis circulating(prenominal) management of Calaveras, Stout PLC, prepared pro forma pecuniary statements for fiscal age ending 1990, 1991, 1992, and 1993. This information is being used to examine historical information and look for relevant patterns in order to further valuate Calaveras Vineyards. gross sales increased from $2.4 million in 1990 to $2.8 million in 1991. In 1992 Calaveras started to catch premium wines with increasing fairish industry prices. Although sales come downd from 1992 to 1993, notes flow improved i mmensely. Increasing the average price, and introducing premium wines, allowed Calaveras to gain a higher profit margin. Based on the pro forma historical financial statements, a comparative analysis has been completed to identify Calaveras position among other manufacturers of wine and brandy.Calaveras, when compared to other manufacturers industry-wide, may have not have the electrical capacity to pay its obligations. The current ratio of 0.4 is less(prenominal) than 1.0, indicating that Calaveras does not have plenteous current assets to cover their liabilities, to include equity. Although the current ratio is low, this does not opine there is a critical problem. Management should be aware and reference bailiwick quickly to determine what action to take.The assets to sales ratio indicates that Calaveras somewhat economical in managing its assets in the relation the revenue generated. The higher the number the less sit downment is motivationed in order to generate revenue . Calaveras travel somewhere in between the upper and median quartile. They go away need to invest in order to generate more revenue.Calaveras is producing a 10% furnish on sales, above the upper quartile of industry norms. This means the vineyard is maturement more efficient and providing growing profits. The return on assets ratio falls between the upper quartile and median quartile of the industry norm, and illustrates how well management is employing the political partys assets. With rate of 4.2% Calaveras is doing better than some of their competitors utilizing assets, but may need to invest to yield a higher rate, which will attract capability partners and lenders.ProjectionsForecast assumptions were used to project cash flow in the contiguous 5 years. All assumptions are have been analyzed for reasonableness and work to generate a forecasted Income statement and equilibrate sheet. A growth rate of 2% may not be sustainable, but it is conservative and will be used in di scounting cash flows. Depending on how Calaveras will give free cash flows, capital expenditures may increase, resulting in a decrease in cash flows. However, these expenditures should yield a higher return on sales, and increase cash flows.ValuationBased on the forecasted income statement and balance sheet a discounted cash flow is calculated, using the weighted average cost of capital to discount cash flows.