The Valuation and Financing of Lady M Confections Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

The Valuation and Financing of Lady M Confections Case Solution

Analysis of Break- Even Point of Bryant Park Location for 2013

For the World Trade Center, the breakeven analysis is based on the semiannual sales reached in 2013 by Bryant Park Location, allowing the firm to generate $2304002 in sales. Moreover, the average units of 28800 is calculated by dividing the expected annual sales revenue of $2304002 by the average price per cake of $80. This shows that the company must sell 79 units per day and 28800 units on an annual basis in order to reach the level of the breakeven point. The comparison of the breakeven analysis of the Bryan Park location and Lady M Confections shows that the breakeven point of the new location seems feasible and viable because it requires less number of units to be sold as compared to the sales required by the Bryant Park.

Evaluation of two alternatives

Open an additional Boutique in the New World Trade Center

Despite the higher amount of money required to open the additional boutique in the New World Trade Center; the company would be able to enjoy the exponential growth and success in the highly competitive market arena, which would provide avenues to generate additional profit returns from the new boutique, located at prime location. It would provide various benefits to the company, such as:

Generation of Healthy profit returns in the long run.
Competitive advantage.
Driving high value proposition.
Delivering an exceptional performance as compared to the market rivals.

$10 million equity stake investment from a Chinese investor

There are various benefits of accepting the offer from the Chinese investor, such as: it allows the company to access the capital, which in turn could be invested on exploiting the growth opportunities, taken into account the robust & rigorous competition in the market. In contradiction to the benefits; the Chinese investor would have vested interest in the company’s popularity as well as in getting the voting rights’ power on major business oriented decisions,after taking stakes in the company’s equity. This would shift the balance of power as well as the balance of authority away from the firm. Moreover, the company would be required to make additional payments against the money invested by the Chinese investor.

Suggestions/recommendations

After analyzing each alternative; the company must go with the option of opening the additional boutique at the New World Trade Center, based on various benefits. It would help the company in reaching to the equilibrium point, within a year. The bank loan would be used as a basis of financing the new boutique at a low interest rate i.e. 8%. At 8% interest rate; the company would be able to borrow 1 million dollar for the period of 1 year.

Additionally, the company could cover the initial investment of $310600 in the time period of 5 years, with 13.19% expected growth rate of sales. The payback period of 5 years means that the firm would be able to recover the amount of initial investment in 5 years, thus demonstrating that the capital would not be tied up. Using the growth assumptions of 5% and 20%; the payback period is calculated as 15.84 years and 3.62 years, respectively.

Based on the analysis and the evaluation; Lady M Confection is advised to choose the option of opening a new boutique over accepting the offer from the Chinese investor. Furthermore, the company must take the advantage of the additional capacity of one thousand seats within the 560 sq. ft. of the business, which is in the close proximity, because it would help the company in strengthening its footprint in the competitive market &in attracting a maximum number of new customers. (Marshall Fisher, 2017).....................

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

The Valuation and Financing of Lady M Confections Harvard Case Solution & Analysis