Introduction

John M. Case Company was founded in 1920. The company was experiencing profitable operation since 1932. By 1984, thecompany was earning 65% market share. The company has been increasing at a 7% compound rate. The cost structure of the company was based on 100% equity, which was owned by Mr Case.

The company has been selling four majorproducts such as Commercial Desk Calendar, Disposable page, Flip over page and Calendar pads in various sizes. The company is creating great economies of scale with an efficientandlow-cost manufacturing of products. Moreover, the marketing of the company was based on high-quality customer services and improved product quality that would satisfy customers.

However, the owner named John M. Case wanted to sell his business as thedoctor had advised him to avoid stresses. He had asked price of $20 million with the initial and immediate cash payment of $16 million. A person named Johnson was interested in purchasing the company. However, he wanted to analyze if he holds or could collect the sufficient fund in order to make payment f $20.

Analysis

To make analysis of the company, few questions have to be answered:

Before considering price, does the purchase of John Case by the management group make sense?

It has been analyzed by Johnson that management of the company is ready to pay $500,000 out of $20 million. According to my analysis, yes, the purchase by management group makes sense. As there would be lack of jobs. Moreover, people would be comfortable and enjoy their jobs, therefore, they do notwant to change it.In addition, as it has been analyzed thatcompany is operating in a stable product market with higher market share. Also, the company is forecasted to grow further. As a result, management group would be found furthergrowth opportunities and increase in standards. Therefore, they would be purchasing the company.

Based on case Exhibit 7, estimate the free cash flows from operations for the years 1985-1990.

The free cash flows of the companymeasure the financial position of the company. it is calculated by subtracting operating cash flows from capital expenditures. The calculation of free cash flows helps the company to exploit different opportunities that would be enhancing the value of thecompany.

Free Cash flows of John M. Company has been calculated. The cash flows show that as the Earning before Interests and Taxes of the company would be decreasing, free cash flows would also be fluctuating throughout the 6 years. However, thecompany is experiencing positive growth in these years. The calculation of Free Cash Flows has been shown in Exhibit 1.

Extend the forecast to 1993, based on the forecasts given by management in Exhibit 7.

Forecasting helps the company to make decisions in order to exploit opportunities. Johnson is making cash flows forecasting in order to decide if it would be beneficial for him to invest in the company. To extend the forecast to 1993, it is important to make assumptions. The assumptions have been made on the basis of previous years forecasting data available.................................

This is just a sample partial work. Please place the order on the website to get your own originally done case solution.

Related Case Solutions & Analyses:

Savage Beast (A1) House of Tata: Acquiring a Global Footprint Palm (B): 2001 Extending an Electronic Trade Network to Sustain Competitive Advantage Interview with Heidi Roizen Video Davis Boatworks ConAgra Inc.: Across the Food Chain Omar Ishrak: Building Medtronic Globally Friendly Cards, Inc. Sandvik Coromant Recycling Concept