NANTUCKET NECTAR: THE EXIT Case Solution
Background:
Tom Scott and Tom First started the business 9 years ago when they started peddling Nantucket Nectars in the Island’s harbor. The Nantucket Island is known for its entrepreneurial spirit. Nantucket Nectars started the business and built the company with the initial investment of $17000 with no formal business training and no market research as they both had done small projects with each other previously throughout the University life and after that.
The company now has products sold in over 30 states, such as Canada, Latin America, Europe and Asia. The business of the company focuses on the niche operations with quality over quantity in mind, however, it is increasing its growth rate and expanding its product line and apart from sellingjuice it has started selling the line of teas and Super Nectars.
Issue Statement:
Scott and First invested their collective savings of $17000 to contract a bottler and finance the inventory in the first two years. In the next two years, the company operated in an under capitalized state on asmall bank loan and in order to raise more funds to improve the distribution and inventory they sold 50% of the company in $600000 to Mike Egan, who is the founder and former CEO of Alamo Car Rentals, which the owners met while serving his boat in Nantucket Harbor during the early days to Allserve. Now the founders of Nantucket Nectars are trying to decide whether to sell the company or keep going as a standalone business with several problems that they are currently facing.
Valuation through Discounted Cash flow Model:
DCF is a valuation method which is used to estimate the attractiveness of the investment opportunity. The analysis uses the future cash flows projections and discount to arrive at the present value of the cash flows, which is then used to evaluate the potential of the investment. The value of the DCF analysis is higher than the current cost of the investment; therefore the opportunity might be a good one................
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