Product Overview

This case examines the financing decisions and valuation of a start-up venture, Common Wealth Crush Co. (CWC), that seeks to support wine production in central Virginia by centralizing processing facilities and resources. With a need for $2 million in outside capital to begin operations, the cofounders must set a value on the business in order to value equity shares and consider the implications of potential loss of control associated with selling an equity stake to outsiders. In establishing the valuation, students are invited to scrutinize a base-case financial forecast and firm valuation. Further, students are invited to consider in this decision the benefits and costs of equity financing versus debt. This entry-level case is intended to introduce a standard curriculum in corporate finance. It can be taught early in a finance course with students who have little background in finance. It can also be used to introduce either financing or firm-valuation decisions. At the Darden School of Business, it is taught as an introduction to admitted or new students.

Learning Objectives

The case may be used to develop any of the following teaching objectives: (1) Introduce the basics of corporate finance, including valuation and financing choices. (2) Demonstrate a financial model and invite students to scrutinize the assumptions and appreciate the financial drivers in the model. (3) Motivate the concept of cost of capital and its estimation. (4) Build best-practice principles for terminal value estimation. (5) Present firm-valuation techniques from either the firm or investor perspective, particularly for early-stage businesses, and the basic considerations for estimating a share price.