1. What is your assessment of Calaveras Vineyards, and what should Anne Clemens do?

2. What is the estimated value of Calaveras?

3. Would Calaveras be a creditworthy borrower?

4. What should Anne Clemens do?

In March 1994, a commercial-loan officer at a West Coast financial institution must assess the opportunity to provide up to $4.5 million in credit to finance the acquisition of a California vineyard and winery. The tasks for the student are to assess the creditworthiness of this business, to perform an independent valuation as a means of testing the appropriateness of the purchase price, and to recommend possible changes in the structure of the deal.

This case was developed to hone students’ skills in two areas:

• Valuing a business: The case presents a financial forecast and data appropriate for estimating discount rates—these may be used as the basis for estimating a discounted-cash-flow (DCF) value of the firm. The case also presents information regarding valuation multiples and liquidation values of the firm. Thus, the relative merits of different valuation estimates may be discussed.
• Credit analysis: Including ratio analysis of coverage and capitalization, sensitivity analysis of a financial forecast, and general schemes of credit analysis, such as the “Five Cs of Credit.”