It is part excel, part short answer. I would like it to be double checked on the numbers part as...

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It is part excel, part short answer. I would like it to be double checked on the numbers part as well because I got a few wrong on the last assignment I brought here. Ty.

Case 2: New Century Coffee Company – Portable Coffee Express New Century Coffee (NCC) Company is a 124-store coffee retailer headquartered in Stockton and operating throughout 6 western states. Its stores are known for their stylish and artistic atmosphere, quick and friendly service, and social consciousness. One glaring, but intentional, omission from each location is a drive-through service channel. The company’s model is to establish locations that serve as a gathering place for customers, as opposed to more traditional quick-service models that focus on volume and efficiency. Although NCC does not want to alter its traditional storefront appeal (nor does it want the expense of adding drive-throughs) it does want to add additional revenue streams by reaching new customers and servicing existing customers more frequently. To do this, NCC is considering acquisition options to diversify its service channel. One opportunity that is under consideration was initiated by Portable Coffee Express CEO Marcy Chapman. Ms. Chapman founded and has grown Portable, a privately held company, into a flourishing 358 location drive-through and walk-up coffee stand business. Portable has a strong presence in NCC’s three largest states (by location), but no presence in the other three states NCC operates in. However, Portable has many locations in large cities across the country, including New York, Chicago, Boston, Washington D.C. and Philadelphia. To determine the viability of an acquisition of Portable Coffee Express by New Century Coffee Company, Ms. Chapman has provided recent financials for her company to NCC CFO Marisa Garcia. Mrs. Garcia has run cash flow forecasts for the consolidated company and estimated incremental cash inflows after taxes from the acquisition over the next 30 years (the relevant time horizon for the analysis). The pertinent financial data is included in the tables below. Questions Complete the questions below in one original Excel file. Show all calculations and formulas for solutions to questions 1 and 3. For other questions that require text-based responses, create a text box in Excel for each (Insert-Text-Text Box). Type-written responses should be at least 1-2 fully developed paragraphs for full credit. This assignment is to be completed individually with no help from others. 1. 1) Based on the estimated future incremental cash flows, what is the highest price (total amount, not per share) NCC should offer Portable for a cash acquisition? Assume a cost of capital of 12%. 2. 2) If NCC planned to finance the acquisition cost from question #1 mostly with bonds, how might the issuance of each type of bond below affect the firm? Include in your answer the characteristics and pros and cons of each bond type. Discuss several pros and cons for each. 1. Straight bonds 2. Convertible bonds 3. Bonds with stock warrants attached 3. 3) A. What is the ratio of exchange in a stock swap acquisition if NCC pays $19 per share for Portable? Explain. (Reference Example 18.5 on page 779 of your textbook for help.) B. What effect will this stock swap have on the EPS of the original shareholders of each company? Explain. (Reference Example 18.6 on page 780 of your textbook for help, particularly Table 18.5.) 4. 4) What alternative merger proposals could NCC make to Portable shareholders? Discuss at least 3. 5. 5) If Portable were a foreign-based company, what impact would this have on the analysis? Describe added costs, regulations, benefits, international cash flow factors and risks (economical, political, currency). Include each of these items in the discussion. 6. 6) A. The case specifically mentions diversifying revenue streams as a merger/acquisition motive. Detail two other merger benefits (motives) that could potentially be applicable in this case. B. Detail two impediments that, if existed, could potentially threaten the short- or long-term success of the acquisition. 7. 7) Based solely on the financial analysis, should NCC move forward with the acquisition? Why?

case-2-wtrhiptc.docx

Ishmeet Singh · Accepted Answer

Sheet1
	Inputs
	Cash Flows for 30 yrs.
	Year	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22	23	24	25	26	27	28	29	30
	Cash Flow	$19,400,000	$19,100,000	$20,100,000	$22,550,000	$27,100,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000
	EPS Table
	Year	2011	2012	2013	2014	2015	2016	2017	2018
	EPS	1.85	2	2.2	2.65	2.95	3.25	3.45	3.7
	Balance Sheet (2018)
	Assets		Liabilities & Equity
	Cash	$3,000,000	Current Liabilities	$3,600,000
	Accounts Receivable	$2,000,000	Mortgage Payable	$5,900,000
	Inventory	$7,000,000	Common Stock	$14,800,000
	Land	$7,250,000	Retained Earnings	$9,700,000
	Fixed Assets	$14,750,000	Total Liability & Equity	$34,000,000
	Total Assets	$34,000,000
	Additional Data
	Item	NCC	Portable
	Earnings available for
common stock	29000000	12580000
	No. of shares for
common stock	7000000	3400000
	MPS	43.3	19	Estimated by NCC
	Ques 1.
	DCF Valuation
	WACC	12%	as per ques
	PV of Cash Flows
	Year	1	2	3	4	5	6	7	8	9	10	11	12	13	14	15	16	17	18	19	20	21	22	23	24	25	26	27	28	29	30
	Free Cash Flow	$19,400,000	$19,100,000	$20,100,000	$22,550,000	$27,100,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000	$28,200,000
	PV of Cash Flow	17321428.5714286	15226403.0612245	14306782.9810496	14330932.6680289	15377267.789974	14286997.6172004	12756247.8725004	11389507.0290182	10169202.7044805	9079645.27185763	8106826.13558717	7238237.62105997	6462712.16166069	5770278.71576847	5152034.56765042	4600030.86397359	4107170.41426213	3667116.44130547	3274211.10830846	2923402.77527541	2610181.04935304	2330518.79406522	2080820.35184394	1857875.31414638	1658817.24477355	1481086.82569067	1322398.95150953	1180713.34956208	1054208.34782328	941257.453413647
	Target Value per share	28.87
	Price set by NCC	19.00	As per Ques
	Difference	$69,064,314.05
	Therefore, additional 69 million 64 thousand and three hundred forteen dollars should be demanded.
	Ques 2.
	Bonds can be a very flexible way of raising debt capital. They can be secured or unsecured,

Case 2: New Century Coffee Company – Portable Coffee Express New Century Coffee (NCC) Company is a 124-store coffee retailer headquartered in Stockton and operating throughout 6 western states. Its...

Answer To: Case 2: New Century Coffee Company – Portable Coffee Express New Century Coffee (NCC) Company is a...

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