Servervault Analysis Case Study
RSM322
Assignment C - ServerVault
Instructor: D.L.Losell
Name: Ching Leong Kwok
Student#: 998199088
LEC: 0201
Date: 28th June 1999
To: Board of Directors of SeverVault
From: Ching Leong Kwok
Subject: Alternatives evaluation and recommendation of ServerVault After reviewing all the potential problems that ServerVault is facing, the most crucial problem is the shortage of cash. It is because ServerVault wants to maintain its competitiveness in hosting industry. Therefore, it needs adequate cash to build more new facilities in order to expand its business in a larger scale. There are several approaches which are worth for SeverVault to consider. The first alternative is Status Quo (SQ), it means do nothing and let the business keeps running in the old way. Since Severvault is going to meet the venture capitalists who are interested in taking an equity stake in SeverVault in exchange for a cash investment, there are few possibilities that may might happen if it has decided to use Status Quo. The first possibility is that ServerVault has failed to attract those venture capitalist to invest. Then, due to the limited cash that ServerVault is holding and the negative cash flow, it will record a negative cash balance of $706422 in September 2000 (Appendix 1). Therefore, as there is no more additional capital investment in this period, ServerVault will not be able to keep operating its business and will result of bankrupt in the end. The second possibility is that if the venture capitalists invest only 5 million. This amount of capital can maintain its business in a short run. However, because investing in hosting company is classified as long term investment, and ServerVault is still in the early stage of its development. 5 million is not adequate to maintain its operation in long run. Since the cost of building the new facilities and the computer hardware are the major cash outflow, the net cash flow will still be negative. Therefore, November 2000 will be the
Assignment C - ServerVault
Instructor: D.L.Losell
Name: Ching Leong Kwok
Student#: 998199088
LEC: 0201
Date: 28th June 1999
To: Board of Directors of SeverVault
From: Ching Leong Kwok
Subject: Alternatives evaluation and recommendation of ServerVault After reviewing all the potential problems that ServerVault is facing, the most crucial problem is the shortage of cash. It is because ServerVault wants to maintain its competitiveness in hosting industry. Therefore, it needs adequate cash to build more new facilities in order to expand its business in a larger scale. There are several approaches which are worth for SeverVault to consider. The first alternative is Status Quo (SQ), it means do nothing and let the business keeps running in the old way. Since Severvault is going to meet the venture capitalists who are interested in taking an equity stake in SeverVault in exchange for a cash investment, there are few possibilities that may might happen if it has decided to use Status Quo. The first possibility is that ServerVault has failed to attract those venture capitalist to invest. Then, due to the limited cash that ServerVault is holding and the negative cash flow, it will record a negative cash balance of $706422 in September 2000 (Appendix 1). Therefore, as there is no more additional capital investment in this period, ServerVault will not be able to keep operating its business and will result of bankrupt in the end. The second possibility is that if the venture capitalists invest only 5 million. This amount of capital can maintain its business in a short run. However, because investing in hosting company is classified as long term investment, and ServerVault is still in the early stage of its development. 5 million is not adequate to maintain its operation in long run. Since the cost of building the new facilities and the computer hardware are the major cash outflow, the net cash flow will still be negative. Therefore, November 2000 will be the