Davis Boatworks
Executive Summary
Carson "Buddy" Davis started Davis Boatworks in 1973 and by 1999 was one of the leading players in the industry. The company did not spend time or resources on traditional marketing strategies. Though they participated in two or three trade shows a year, they mostly relied on repeat customers, word of mouth and Buddy Davis himself to attract customers. The company had focused on the manufacturing and sales side of business for years. The company was basically run out of a checkbook and there were no formal accounting controls until John Altizer was hired as the CFO.
The sport fishing boat industry in 1999 was booming and Davis Boatworks had more orders than their current manufacturing facility could handle. An expansion of manufacturing facility would cost then $3 million. They also needed an infusion of $2 million to improve their net working capital. In order to achieve this Carson Davis was contemplating selling part of his stake in the company to an investor. Most of Carson Davis's personal wealth was tied up in Davis Boatworks as equity. Buddy Davis hoped to take $5million to $10 million personally from this transaction.
To find the value of the firm, we have reviewed the recent financial statements including actual income and balance sheet from FY1996 - 1999 and projected income and balance sheet with and without expansion from FY1999 - 2003. We also considered historical rate of return data for the analysis.
We employed the Capital Asset Pricing Model (CAPM) with this data to find the value the firm to be $1.69million - $2.89 million.
The Problem
Carson "Buddy" Davis started Davis Boatworks in 1973 making a single 46' boat for a customer in Manteo, North Carolina. Over the next twenty-six years, Davis earned a reputation as one of the most knowledgeable people in the sport fishing industry. Throughout the history of his business, it had been not only the quality of the Davis Boatworks products, but also Buddy Davis'
Carson "Buddy" Davis started Davis Boatworks in 1973 and by 1999 was one of the leading players in the industry. The company did not spend time or resources on traditional marketing strategies. Though they participated in two or three trade shows a year, they mostly relied on repeat customers, word of mouth and Buddy Davis himself to attract customers. The company had focused on the manufacturing and sales side of business for years. The company was basically run out of a checkbook and there were no formal accounting controls until John Altizer was hired as the CFO.
The sport fishing boat industry in 1999 was booming and Davis Boatworks had more orders than their current manufacturing facility could handle. An expansion of manufacturing facility would cost then $3 million. They also needed an infusion of $2 million to improve their net working capital. In order to achieve this Carson Davis was contemplating selling part of his stake in the company to an investor. Most of Carson Davis's personal wealth was tied up in Davis Boatworks as equity. Buddy Davis hoped to take $5million to $10 million personally from this transaction.
To find the value of the firm, we have reviewed the recent financial statements including actual income and balance sheet from FY1996 - 1999 and projected income and balance sheet with and without expansion from FY1999 - 2003. We also considered historical rate of return data for the analysis.
We employed the Capital Asset Pricing Model (CAPM) with this data to find the value the firm to be $1.69million - $2.89 million.
The Problem
Carson "Buddy" Davis started Davis Boatworks in 1973 making a single 46' boat for a customer in Manteo, North Carolina. Over the next twenty-six years, Davis earned a reputation as one of the most knowledgeable people in the sport fishing industry. Throughout the history of his business, it had been not only the quality of the Davis Boatworks products, but also Buddy Davis'