Your assignment is to create a well written report, this is due December 1st by class time. Come to class prepared to discuss the case, participation will be part of your grade. This report should include the following information:
How many cakes would Lady M need to make and sell in a year in order to break-even? Does this number seem feasible?
Assuming sales in one year are break-even, how quickly would sales need to grow after the first year in order to pay the start-up costs off within 5 years? Is this growth rate feasible?
What is your recommendation? Should Romaniszyn open the new location in the World Trade Center?
What is Lady M’s enterprise value? Does it matter if one uses an EBITDA multiple or a perpetuity growth formula for a terminal value? How much of an equity stake should they be giving up to the potential investors from China?
What do you think of Romaniszyn’s and Tom’s baseline assumptions? Are they realistic?
Do you think they should take the offer from the potential investors from China?
This report should be written in a word document or pdf, the file should not exceed 10 pages in length (including any charts and/or pictures).
The following can help in guiding you to create the report:
What does it take to make it in the food industry? (https://www.bloomberg.com/news/articles/2014-07-12/crumbs-files-for-bankruptcy-after-shutting-cupcake-shops)
When asked to find a break even number of cakes or sales growth, these are excellent moments to use excel in order to quick guess and check different values with linked and automatically calculated cells.
How much of the year 2013 was the Bryant park location in operation and what does that mean for your estimates?
If the Investor from China wants to buy a 10% stake in Lady M and exclusive rights to create and own 100% of Lady M China, and is willing to pay 10 million dollar is this a good deal for Romaniszyn and Tom? Assume Lady M China will be worth about 1/3 of the Lady M enterprise value that you have calculated.
For more information on Food Industry read this: https://en.wikipedia.org/wiki/Food_industry
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