Sun View Valley Corporation ( Svvc )

2069 Words Mar 31st, 2015 9 Pages
School of Business & Economics
Master of Business Administration
BUSN-6020 - Corporate Finance (Winter 2015) Case Study Assignment 2: Sun View Valley Corporation (SVVC)

Prepared for:
Dr. Raymond Cox

Executive Summary 2
Question 1 – Methods Used 3
Payback Method 3
Discounted Payback 3
ARR Method (AAR, ROI) 4
Profitability Index (PI) or Benefit / Cost Ratio 4
Internal Rate of Return (IRR) 5
Modified Internal Rate of Return (MIRR) 5
Equivalent Annual Annuity 5
Question 2 - Sensitivity Analysis 6 o Selling Price 7 o Variable Cost 7 o Fixed Cost 7 o Investment Cost 7 o Net Working Capital 7 o Discount Rate 7
Question 3 - If the abandonment value is $9 million 8
Question 4 - Should SVVC make this investment? 8
Appendix - Exhibits 9
References: 13

Executive Summary
Based on what we know today, our estimates are favorable and indicate that we should go ahead with the investment in Venus Vinos Project of $18,000,000 and accept the erosion / cannibalism associated with the Pluto Division. SVVC prepared a series of pro forma financial statements based on the VVP anticipated returns.
The NPV for the 5-year for Venus Vinos Project (VVP) is estimated to be $54,973102 over five years; however, the expected returns on the investment are $59,506,848 NPV to be recognized if we follow the abandonment strategy in year 4. The additional value source for this comes as a result of…

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