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

Contents
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

SUN VIEW VALLEY CORPORATION
VENUS VINO PROJECT FINANCIAL VIABILITY ANALYSIS
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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