Remson Mark C.

Macawile Financial Analysis & Planning-Quiz #1

MIB 2017 - LT2 Prof. Noel Canivel
July 26, 2017

C.R. Plastics case was discussed during the class and as the case provided there are two alternatives for
Jamie Baily: To purchase new equipment and to use level loading. We used the provided projected balance
sheet and income statement for the first option and computed for the projected balance sheet and
income statement.

Looking at the total net income that will be generated by alternative 1 and 2 it will give a value of $855,216
and $628,193 respectively. In percentages, this will clearly tell us that choosing alternative 2 provides a
greater net profit margin of 10.3% compared to alternative 1 with 7.57%.

Given that I will consider alternative 2 the percentage of equity or ownership that can be acquired in
exchange to $1,298,585 can be calculated as follows

ENTERPRISE VALUE 3,025,309

Net Debt 2,031,795
Line of Credit 1,798,585
Equipment Loan 333,210
Less: Cash 100,000
Equity 993,514
Shareholder Loans 993,264
Share Capital 250
EXTERNAL FUNDING NEEDED 1,298,585
PERCENTAGE OWNERSHIP 43%

The relationship of the external funding needed and the enterprise value can be concluded as almost half
and given that one is asking for an almost half of the enterprise value it will intuitively be equated to a
bigger value of percentage equity in exchange. Thus, a 43% of equity will be a good deal for $1,298,585.