Location: Rancho Mirage, CA
The attached spreadsheet model is for the Rancho Mirage Golf Club located in Rancho Mirage, CA, and currently listed for sale at $3,500,000. This model includes a pro forma income statement and balance sheet for the golf club based on market assumptions in the area and an analysis of the costs of capital and internal rate of return forecasted for the golf club, plus a high and low market cash flows projection with an optional capital expansion in the high market. The model allows variables to be changed for all major inputs of the computations and includes citations for assumed values in the models.
In the model, the golf club has a weighted average cost of capital and internal rate of return of 7.13%. This was calculated using a 47.4% debt proportion and a 52.2% equity proportion. Through our analysis of free cash flows, we determined the total value of the assets as being $4,060,000; for this reason, we believe the listed sales price of $3,500,000 for the golf club is a reasonable amount, as it is $560,000 less than the projected value of the assets. The whole project has a negative value of ($296,595). Due to this poor outlook, we will not purchase the golf course.