Location: San Diego, CA
The attached spreadsheet model is for Cookie Club of America located in San Diego, CA, but can be altered easily for the analysis of similar companies. This company was recently seeking venture capital for their military emblem cookie line. Our model for this venture includes assumptions for the company and the market as a whole. Additionally, we have forecasted income statements and balance sheets through 2020 based on those assumptions accompanied by an amortization table to calculate the needed loans. Considering the forecast, we have also created a break-even analysis, an analysis of the weighted cost of capital, as well as free cash flows and a net present value and internal rate of return for the company.
Considering the assumptions that we used, a cookie production company such as this would have a weighted average cost of capital of 7.53%, but it will have an internal rate of return of 19.80%. The WACC could be adjusted by the rates of the loans and the volatility (Beta) of the company. Additionally, this could be changed by the debt and equity proportions. With the assumed market conditions, this company could be quite profitable if executed correctly. Unless you had extremely unfavorable loan rates and returns desired by investors, the IRR would always be higher than the WACC, making for a profitable venture.
For this reason, we believe that this would be a good investment by a small venture capital firm or by angel investors. They have a track record of sales with other cookies and contracts with major distributors. Overall, a company that has a WACC of only 7.53% and an IRR of 19.80% is almost always a good investment.