Harvard Case: Calaveras VineyardSolution needed. The questions are attached.

Calaveras Vineyards Assignment Questions Objective: Valuation of a business using DCF techniques and credit analysis Clarifications: 1. At the moment of closing, Calaveras will have zero receivables, since Stout PLC will retain them. This reflected Dr. Martinez's dissatisfaction with the former marketing company and her uncertainty about the actual value of the receivables. 2. Case Exhibit 6 presents the historical performance of Calaveras as if it was a standalone company, and it excludes intercompany sales of wine to Stout PLC. Case Exhibit 10 gives the actual historical price and volume of Calaveras including sales to Stout, and thus implies higher historical revenues for the firm that reported in Exhibit 6. Martinez was confident that either Stout PLC would continue to be a customer of the vineyard or that Calaveras would succeed in finding customers to replace Stout. The financial forecasts in the case are consistent with this outlook. Questions: 1. Briefly recap the history of Calaveras. 2. The new marketing company plans to collect Account Receivable and remit payment to Calaveras. Briefly discuss which company has responsibility for unpaid receivables after 90 days and why. 3. Calculate free cash flow for 1994-1998 using projections in the case with the adjustments that Anne Clemens is recommending. 4. What discount rate would you recommend for valuing Calaveras and why? Show your calculation and support your assumptions. 57 5. What is the NPV of the free cash flows from Q3 above? What growth rate in perpetuity did you use and why? What is the remaining equity value after subtracting the required investment at closing? 6. What is the liquidation value of the company and how does it compare to the debt to be taken out at closing? 7. Would you say Calaveras would be a creditworthy borrower? Why or why not? Show appropriate financial ratios and also discuss the 5C's of credit to support your conclusion. See credit analysis template. 8. Should Anne Clemens participate in the loan? Why or why not? Calaveras Vineyards Exhibit 10