Nantucket Nectars Case Study Memo structure - Essay Example

Nantucket Nectars Case Study Memo structure To The owners From Financial advisor RE Nantucket Nectar’s options 10th October 2012IntroductionThe case issue in Nantucket Nectar is the timing in which the company should float its shares for the initial public offer. The company has an option of selling the company to other willing companies or retaining the company the way it is. The managers of the company are facing a problem of deciding the time that would be appropriate for declaring an initial public offer and a decision whether to sell the company.

The manager will eventually have to decide whether to float the shares of the company or to sell the company. The factor that is supposed to be considered before a decision is made is the economic viability of the decision that will be taken by the manager.AnalysisThe analysis will be carried out by the use of the net present value method. The reason as to why the method has been used is the fact that the method makes use of discounted cash flows and there is a clearly decision criteria that should be used in the making of a decision.

YearNet income( $)Discounting rate @12%Discounted cash flows97’9780.8929873.256298’23240.79711852.4699’40010.71182847.9200’63120.63554011.2801’89220.5674506202’118750.50666015.875Total20662.79The above calculations have considered the projected net income for the following six years.InterpretationThe present value for the future projected incomes for the company is equivalent to $20,662.79. That will mean that the decision that will be made by Nantucket Nectar should bear into mind the net present value obtained.

That means if the company decides to float shares, the income should be greater than $ 20662.79, if the managers decide to sell the company, the best price should be greater than $20662.79.RecommendationNantucket Nectar should consider the bids that are been offered and the company should also calculate the amount of money that will arise from the initial public offer. The value that should be considered should be greater than $ 20662.79 and that will form the basis for making the decision since the best offer should be taken by the company.

If none of the offers turn out to be more profitable, then the company should be maintained at its current state (Gerald et al, 112).Work citedGerald I. White, Ashwinpaul C. Sondhi and Dov Fried. The Analysis and Use of Financial Statements. John Wiley & sons P/L. (2002)