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 Study Analysis

Suitability and attractiveness of the financing offer

$10 million equity stake investment from a Chinese investor

If the company intends to pursue the option of accepting the offer from the Chinese investor; it would help the company to access the capital, which in turn could be invested for the company’s further growth, taken into account the intense and robust market competition. At the same time,after taking stakes in the company’s equity; the Chinese investor would have vested interest in the company’s popularity and getting the right to vote on major business oriented decisions, which in turn would shift the balance of power and authority away from the company. Additionally,the company would be required to let go of its major proportionfrom the equity stake, and would have the obligation of making payments against the money invested by the investor.

Open an additional Boutique in the New World Trade Center

Even though, the company would have the requirement of spending the initial amount of initial of $310600, to open an additional boutique in the New World Trade Center, butit would lead towards an exponential growth of the company in the highly competitive market arena, providing avenues to generate additional revenues from the new boutiquelocatedat the prime location. Additionally, it would allow the company to reach to new customers, generate healthy profit returns in long run, drive high value proposition anddeliver an exceptional performance than the market rivals.

Set of recommendation

After taking under consideration the qualitative as well as the quantitative analysis; the company is advised to pursue the option of opening the additional boutique at the New World Trade Center, as it would allow the company to reach to the equilibrium point, within a year. The opening of new boutique should be financed by bank loan at low interest rate. At the interest rate of 8%, the company could borrow $1 million for the period of one year. The cost of borrowing would amounts $8000. The company could cover the initial investment of $310600 in the time period of 5 years, with the expected growth rate of sales of 13.19 percent. The payback period of 5 years means that the company could recover the investment amount in 5 years, whichindicates that the capital would not be tied up. The company could focus on the early paybacks as it would have an improved liquidity. With the growth assumptions of 20% and 5%, the payback period is 3.62 years and 15.84 years respectively. All in all, the company is recommended to opena new boutique rather than accepting the offer from the Chinese investor,and it should take advantage of the additional capacity (one thousand seats within the 560 sq. ft. of the business), which is in close proximity, thus helping the company inattracting a maximum number of new customers and strengthening its footprint in the competitive market.(Marshall Fisher, 2017).......................................

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