Location: Rexburg, ID
Our group valuated a local car wash in Rexburg, ID called Xpress Car Wash. The car wash sits on 0.97 acres of land, the building of which is 4,500 square feet. In our valuation, we assumed the property value at $280,000 ($288,000 per acre), and building value at $675,000 ($150 per square foot). Additionally, our model allows for changes in variables and assumptions made in the initial valuation. Furthermore, we have cited values used to derive our assumptions wherever possible.
Our model assumes an average car wash price of $5, nearly 3,000 car washes per month, and an annual growth in revenue of 3%. Total revenue in year 1 is $236,000, with total expenses of $205,000, resulting in a net income of $23,000. Based on the cost of the initial investment, and the resulting cash flows projected and assumed rates of interest, the weighted average cost of capital (WACC) is 7%. Our projected IRR based on the free cash flows of the eight years is also 7%.
In conclusion, the model we have created gives us deeper insight into the value of the investment. Based on the calculations produced within the model, the investment appears to be a sound decision. However, we are not entirely confident in our assumption that the car wash can generate 3,000 washes per month in Rexburg. There are a total of seven car washes in Rexburg, and roughly 25,000 vehicles. The Rexburg climate also drastically impacts demand for car washes. Thus, we believe further analysis and research should be conducted.