For Sale Website:
Attic Space Self Storage is a company that we have been analyzing to determine if it would be a wise investment. Our first step was to construct a fifteen year pro forma income statement and balance sheet. In this process, we had to make some major assumptions which included: a tax rate of 36%, interest on the business loan required to purchase the company of 9%, a beta of .87, and depreciation on all capital expenditures over a thirty year period. We also assumed a $50,000 refurbishing fee acquired seven years after the initial investment. The major capital expenditures we incurred before operations began were a $315,000 loan to purchase the company and equity contributions of $35,000.
We used previous financials to calculate the tax rate and a compatible public company to find the beta. After the financials were complete, we used the information to calculate the WACC with the current debt and equity. With a WACC of 6.49%, this company does not need a major return to satisfy their obligations. We also calculated an IRR of 7.61%, which is a positive sign because the IRR is above the WACC.
Because the IRR was greater than the WACC, we can assume that the company purchase price is listed below true value. We found that if the company were purchased for $378,434, the WACC would equal the IRR. This means that the company is listed at 8% below true value. With all else equal, we believe that this company would provide a sound and stable investment for a company or private party.