The valuation and Financing of Lady M Confections Case 3. Lady M Confectionaries, Exams of Nursing

Download The valuation and Financing of Lady M Confections Case 3. Lady M Confectionaries and more Exams Nursing in PDF only on Docsity! NAME MATRIC CARD NAJWA ATHIRAH BINTI AZRIN A14HA0205 EMILY ONG HUI LEE A13HA0023 AIN SHAFIKA BINTI HASBI A14HA0198 HAIYUSNIZA BINTI HAIRI A14HA0274 MOHAMAD ZAKRI BIN KARIM A13HA0057 ANIS AFFIQAH BINTI MOHAMAD NOR A14HA0271 The valuation and Financing of Lady M Confections Case 3. Lady M Confectionaries SUMMARY • Lady M Confections is a cake wholesale business company. • Founded in May 2001. • Open their second bakery in 2012 in The Plaza Food Hall in New York City. • Sold cakes to upscale restaurants and luxury hotels in New York City. • Opened a third shop in New York City and one in Los Angeles. • Had licensed in both Singapore and South Korea. cavinteo. blogspot. com SUMMARY • Featured in Oprah Magazine twice in one year and attracted the attention of many celebrities. • Investors want expand the Lady M brand to Asia and the Middle East. • Offered $10M dollars line of credit in exchange for an equity stake in the company. • Exclusive franchising rights in China. • Romaniszyn consider to opening a new boutique in the new World Trade Center. • Annual rent for that location was $310,600. • Decide to choose whether World Trade Center location or Chinese investor’s offer. • In terms of breakeven analysis, profit and all related to the growth and benefits of the company. CONSIDERATIONS TO OPEN NEW BOUTIQUE AT WORLD TRADE CENTER IN NEW YORK. DOES THE NUMBER SEEM FEASIBLE? a) or) Cc fppt.com  THE REASONS BECAUSE... The surrounding area have a many of business building. The area was the focal point to people from elite group. Lady M is a one BIG name in New York. Assuming sales in year one are break- even, how quickly would sales need to grow after the first year to pay the start-up costs within 5 years? Bryant Park Revenue : $1,152,001 Cakes Sold = $1,152,001/$80 =14,400 Cake Sold per day = 14,400/365 = 39.45 @ 39 WTC Cakes Sales per day (to reach break-even) = 65 cakes • WTC location would have similar patterns to Bryant Park ➢ Whole cake purchases from businessmen on their way home ➢ Individual slices cakes during lunch break & want to have a meeting in a different location ➢ Meaning that Lady M in WTC location still need additional 26 to at least reach break-even • Lady M should not solely make a prediction based on Bryant Park’s revenue because the sales pattern in WTC might be different depending on how : ✓ Differences in customer style and preferences ✓ Effort & initiatives WTC location to promote and attract their target market Should Romaniszyn open the new location in the World Trade Center? STRATEGIC PLACE • One of the iconic location in New York City • There is a lot of peoples doing their business there. • This would attracts more people to come. • Business market larger or wider. MARKETING STRATEGY • Advertise their product through various mediums. • Offers their customers with coupons and some reward. • Draw more customers as well as improving their sales. • applying some technology methods. • For example, “In-Apps and Online Ordering”. • Makes their customer to be able to order their favorite cakes whenever and wherever they want. • Customers also feel less rushed when ordering through an app. • Help the customers to cut down on lines and wait times. CONSIDERATIONS ON THE OFFER FROM THE CHINESE INVESTORS. Was this offer worth it ? Would Lady M accept the $10 million equity-stake offer from Chinese investors QUESTIONS ??? = NPV + PV of TV PERPETUITY MULTIPLE (PM) = (1 + TERMINAL GROWTH RATE)/ (WACC – TERMINAL TERMINAL VALUE = EBITDA of 2019 x 12 GTERROMWINTHALRVAATELU) E = CASH FLOW of 2019 x PM 12X EBITDA MULTIPLE PERPETUITY GROWTH ENTERPRISE VALUE (EV) 44 Table 3a: Terminal Value using Perpetuity Growth Method 45 53 |Table 3b : Terminal Value using 12xEBITDA Multiple Method 46 WACC 12.00% 54 47 Terminal growth rate 4.00% 55 EBITDA multiple 12.00 43 Free Cash Flow (2019) 5.977.333.05 56 EBITDA (2019) 9,093,196.07| 49 Perpetuity multiple 13.00 57 Terminal Value 109,118,352.82 50 Terminal Value 77,705,329.65 58 51 Table 3c: Enterprise Value Method Perpetuity | 12x EBITDA NPV 12,008,366.25| 12,008,366.25 Terminal Value (TV) 77,705,329.65| 109,118,352.82 PV factor (12%, 5) 0.56743 0.56743 Present Value of TV 44,092.335.20] 61,917,026.94 Enterprise Value 56,100,701.46/]73,925,393.19 Fund to be received from invest 10,000,000.00] 10,000,000.00 Giving up to investors 17.83% 13.53% VET Re lee 8 yh bias Romaniszyas and J@ baseline assunapten ? AV EStiNey ne alliZalnley, fppt.com  Change in WACC doesn’t affect TV of EBITDA Change in PV factor (20%, 5) EBITDA is less reliable in calculating terminal value ➢ Less affected by WACC ➢ EBITDA multiple change over time. TV decrease by half What if WACC is 20% ? Unrealistic capital expenditures so low after 2015 Baseline Assumptions : 2013 2014 2015 2016 2017 2018 2019 Sales growth 81.30% 46.8% 20.0% 40.0%) 25.0% 25.0%) 25.0%! COGS (% of sales) 21.80% 21.8% 21.8% 21.8% 21.8%| 21.8% 21.8% SG&A (% of sales) 58.00% 58.0% 57.0% 56.0% 55.0% 54.0% 53.0% R&D 0.00%| 0.0% 0.1% 0.1% 0.1% 0.1% 0.1% Capital expenditures (% of sales) 15.90%] 0.324] 0.324] 0.3% 0.324] 0.3% Depreciation (% of CapEx) 12.50% 75.0% 85.0% 90.0% 95.0%] 100.0% Amortization 0.00%| 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Additions to intangibles 0.00%| 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Change in working capital 8.10% 1.9% 1.9% 1.9% 1.9% 1.9% 1.9% (of change in sales) Taxes 35.0%] 35.0% 35.0%] 35.0% 35.0%] 35.0% fppt.com  Do you think they should take the Chinese investors’ offer? Why/why not? Conclusion • Lady M should decide to open a new boutique at World Trade Center (WTC). • It is recommended for them to choose to take out a bank loan instead from taking fund from the investors. • With the interest rates so low, it is an advantage to the company to take a bank loan. The company also can pay the principal without having any problem because the company is forecasted to have a good cash flow. The company do not have to pay high interest on the principal that the company loan. 7 THANK YOU