Answer these questions related to the Harvard Case Study Called The Valuation and financing of Lady M Confections.

Ill give you a thumbs up if answered properly! Go into depth on your answers please.

1. How many cakes would Lady M need to sell at a WTC location in a year in order to break even (only consider costs that are provided in the case in regard to this location in page 2-3)? Does this number seem feasible?

2. Assuming sales in year one is break-even, how quickly would sales need to grow after the first year to pay the start-up costs within 5 years at a WTC location (using profits from year 2-5)? Is this growth rate feasible? (Do not consider taxes)

3. What is your recommendation? Should Romaniszyn open the new location in the World Trade Center?

4. What is Lady M's enterprise value using a perpetuity growth for a terminal value? (Assume we are doing this analysis at the end of 2014.) Two clarifications on the assumptions given. 1. Depreciation is going to be 100% of Capex in 2019 and drop by 5% point each year. This means Depreciation in 2018 will be 95% of the Capex of 2018 and so on and so forth. 2. SG&A in 2014 will be a certain percentage of Sales in 2014 (You should calculate this yourself. For example, if it is 60%, it dropping by 1% every year means 2015 SG&A will be 59% of sales in 2015. Do not use line items to build SG&A up from scratch. Just use the sales amount to get to SG&A value for each year to make this simple.) Change in working capital to change in sales ratio should remain constant throughout years and this will allow you to calculate change in working capital next year. How much of an equity stake should they be giving up to the Chinese investors?

5. What do you think of Romaniszyns and Tom's baseline assumptions? Show a sensitivity table by changing WACC and Capex as a percentage of sales ratio.

6. Do you think they should take the Chinese investors offer? Why/why not?