Name:Ranjit Kumar Gwalia

Roll no:Pgp32338
Description: Calaveras vineyard case

Cost of Debt (pre-tax) 9.50%

Tax Rate 37%
Risk Free Rate (30 years T- bonds) 5.85%
Market Risk Premium 7.40% Return on small company stocks less returns on long term govt bonds
Cost of Equity 15.37%

Calculation of beta:
Wine Category % Sales Comparable Comparables Unlevered Beta
Premium 74.40% Finn & Sawyer 1.312
Generic 9% Canandaigua 0.54
Speciality 16.60% Frogg's Jump 0.867

1.17
(Weighted Avg of Unlevered Beta)
Beta Levered 1.29

WACC 14.07%
rns on long term govt bonds

D/E Target Capital Structure

0.0480 D/E 0.16
0.2770 E/V 0.86
0.1560 D/V 0.14

0.16
(Average of D/E)
Forecast Assumptions

Key Assumptions:
Case Sales Exhibit 11
$/Case Exhibit 11
Gross Margins
Estates 0.5
Select-other 0.38
Chardonnay 0.4
California 0.36
Generic 0.29
Special Accts 0.38
Winery 0.49
Dividend Payout:
Now-1996 0
1997&After 0
Cash Minimum (m) 50
AR/Sales 0.1
INV(T)/COGS(T+1) 1
CL(T)/COGS(T+1) 0.1
SGA/Sales 0.14
Depreciation 5-yr, S-L
Capital Expenditures 250
Interest Rate 0.095
Tax Rate 0.37
Inflation Rate 0.02
Real Price Growth 0.02
Amortiz. Organization Costs: 5 years.
Historical Case Sales and Prices by Variety

1991 1991 1992 1992 1993 1993

Cases $/Case Cases $/Case Cases $/Case
Estates
Sauvignon Blanc 4436 46.85 2924 48.25 6133 49.7
Cabernet Sauvignon 3258 45.56 2887 46.92 2993 48.33
Petite Sirah 2547 46.42 1574 47.82 1599 49.25

Select Vineyards
Chardonnay 8633 38.88 16537 40.05 11569 41.25
Savignon/Fume Blanc 11794 37.85 9750 38.98 3444 40.15
White/Rose Zinfandel 5835 38.03 4482 39.17 2112 40.35

California
Petite Sirah 9472 32.52 7666 33.5 5864 34.5
Chenin Blanc 5393 33.13 5210 34.13 1353 35.15
Other 7299 30.73 1350 31.65 322 32.6

Generic
White Table Wine 17685 22.42 13301 23.1 7716 23.79
Red Table Wine 4657 20.09 2976 20.69 2337 21.31

TOTAL WHOLESALE 81009 68657 45442

Special Accounts
Hotels 0 37.61 0 38.74 2090 39.9
Gigantic Airlines 11320 37.42 23465 38.54 12715 39.7
Altar Wines 2388 41.59 2157 42.83 3155 44.12

Winery 3633 54.15 2957 55.78 2188 57.45

TOTAL NON WHOLESALE 17341 28579 20148

TOTAL CASE SALES 98350 97236 65590

Forecast Case Sales and Prices by Variety

1994 1994 1995 1995 1996

Cases $/Case Cases $/Case Cases
Estates
Sauvignon Blanc 9000 51.70788 12000 53.79687835 14000
Cabernet Sauvignon 5000 50.282532 6000 52.31394629 6000
Petite Sirah 2500 51.2397 3000 53.30978388 3000

Select Vineyards
Chardonnay 16000 42.9165 19000 44.6503266 22000
Savignon/Fume Blanc 8000 41.77206 8000 43.45965122 8000
White/Rose Zinfandel 2000 41.98014 3500 43.67613766 5000

California
Petite Sirah 5000 35.8938 5000 37.34390952 5000
Chenin Blanc 1728 36.57006 0 38.04749042 0
Other 1000 33.91704 0 35.28728842 0

Generic
White Table Wine 10000 24.751116 10000 25.75106109 10000
Red Table Wine 2500 22.170924 2500 23.06662933 2500

TOTAL WHOLESALE 62728 69000 75500

Special Accounts
Hotels 4000 41.51196 4000 43.18904318 4000
Gigantic Airlines 16500 41.30388 16500 42.97255675 16500
Altar Wines 3500 45.902448 3500 47.7569069 3500

Winery 2790 59.77098 2790 62.18572759 2790

TOTAL NON WHOLESALE 26790 26790 26790

TOTAL CASE SALES 89518 95790 102290

1996 1997 1997 1998 1998
$/Case Cases $/Case Cases $/Case

55.97027224 14000 58.23147124 16000 60.58402267

54.42742972 6000 56.62629788 7000 58.91400032
55.46349915 3000 57.70422451 3000 60.03547518

46.45419979 24000 48.33094947 24000 50.28351982

45.21542113 8000 47.04212415 8000 48.94262596
45.44065362 5000 47.27645602 5000 49.18642485

38.85260346 5000 40.42224864 5000 42.05530749

39.58460904 0 41.18382724 0 42.84765386
36.71289487 0 38.19609582 0 39.73921809

26.79140395 10000 27.87377667 10000 28.99987725

23.99852115 2500 24.96806141 2500 25.97677109

77500 80500

44.93388053 4000 46.7492093 4000 48.63787736

44.70864804 16500 46.51487743 16500 48.39407847
49.68628594 3500 51.69361189 3500 53.78203381

64.69803099 2790 67.31183144 2790 70.03122943

26790 26790

104290 107290