Business Performance – Case Study - Accounting and Finance Assignment Help

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Prepare a board report to advise management on the potential acquisition. A copy of the market-based and income-based valuations, prepared by the external advisors, can be found in the ‘Valuation Model with Sensitivity and Funding Workings’ Microsoft Excel file that has been created for this assessment. The ‘Sensitivity’ and ‘Funding’ sections of this Excel file are not part of that due diligence material but will be used in Tasks 4 and 5 below. Your report should include the following sections and your response to each task below.

1. Executive summary

Write an executive summary of your findings.

2. Market-based valuation

Using the ‘Market-based valuation (MBV)’ section of the ‘Valuation Model with Sensitivity and Funding Workings’ workbook, and information in the case study, evaluate the valuation of $33 million as follows:

(a) Identify and explain three (3) issues with the methodology used in the MBV.

(b) Based on your response to (a), advise the board whether the $33 million MBV potentially undervalues or overvalues Vita-Tye. Provide evidence to support the advice.

3. Income-based valuation

Using the ‘Income-based valuation (IBV)’ section of the ‘Valuation Model with Sensitivity and Funding Workings’ workbook, and information in the case study, evaluate the valuation of $24 million as follows:

(a) Noting that the valuation has been prepared on the basis there is no change to manufacturing and suppliers, identify three (3) assumptions in the model that may be subject to uncertainty. Justify your response.

(b) Identify and explain two (2) assumptions that would change if Vita-Tye purchases from Australian suppliers and manufacturers.

(c) Based on your response to (a), conclude whether the $24 million IBV potentially undervalues or overvalues Vita-Tye.

4. Sensitivity analysis

Using the ‘Sensitivity’ section of the ‘Valuation Model with Sensitivity and Funding Workings’ workbook:

(a) Prepare three (3) sensitivity analyses to the IBV by varying the assumptions identified in Task 3(a), in the worksheets provided (SA1–3). For each area of uncertainty:

1. Overwrite the existing assumption(s) with a more appropriate value, highlighting the cells you update (in the Excel file).
2. Note the revised IBV and quantify and explain the change in the enterprise value from the base case of $24 million (in your report).

(b) Prepare one (1) sensitivity analysis in worksheet SA4, varying the assumptions identified in Task 3(b) concurrently.

1. Overwrite the existing assumption(s) with a more appropriate value, highlighting the cells you update (in the Excel file).
2. Note the revised IBV and quantify and explain the change in the enterprise value from the base case of $24 million (in your report).

As you change each assumption in tabs SA1–4, a new enterprise value will be calculated within the same worksheet.

5. Funding

Assume Casimir will require funding of $29 million to proceed with the acquisition. Using the ‘Funding’ section of the ‘Valuation Model with Sensitivity and Funding Workings’ workbook:

(a) Calculate Casimir’s capacity to borrow before the acquisition (headroom).

(b) Evaluate Casimir’s ability to fund the acquisition with debt.

(c) Evaluate two (2) additional potential sources of funding.

6. Ethical issues

Consider the information provided, noting Casimir’s values and assessing the likely motivators for the management team (Sarah, Raj, Mei and Leo).

(a) Identify and explain three (3) ethical issues that may arise if the acquisition were to proceed, with no change to manufacturing or suppliers.

(b) For each issue identified in (a), explain whether the ethical impact would change if Vita-Tye were to purchase from Australian suppliers and manufacturers.

7. Recommendation

(a) Recommend whether Casimir should proceed with the acquisition of Vita-Tye as part of its future investment strategy.

(b) Recommend whether Casimir should purchase from Australian suppliers and manufacturers.

(c) Based on your responses to tasks 2–6, evaluate the proposed price of $29 million.

Submission requirements

You need to submit two (2) files for this assessment:

• A 2,000-word report, including an executive summary (Microsoft Word format (DOC/DOCX) is preferred).
• The ‘Valuation Model with Sensitivity and Funding Workings’’ Excel workbook with worksheets for calculating revised valuations and funding capacity (Excel format (XLS/XLSX) is preferred).

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