CALAVERAS VINEYARD

Investment Proposal Evaluation

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JANUARY 31, 2019

MICROSOFT
[Company address]
The case answers the following questions:

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

Vineyards appropriate? Prepare a discounted-cash-flow valuation of Calaveras, using

the attached supplemental exhibit and 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? Perform a sensitivity analysis on assumptions that you suspect to be “key

value drivers”—what are the insights you derive from this analysis? Consider other

methods of estimating Calaveras’s value, including book, liquidation, and multiples

methods.

2. 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 – 4 or 5 Cs or Corporate Credit Analysis. What credit risk rating

would you ascribe to the company? What is their probability of default (using standard

Agency ratings / tenor default tables)?

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 counterproposal to NationsBank indicating terms

on which you would be willing to participate