Location: Whitefield, NH
The included spreadsheet is an analysis of the Village Gun Store which is listed for sale in Whitefield, NH. The current listed sales price is $495,000, which does not include inventory valued at $300,000. This analysis model includes a pro forma income statement and balance sheet for the gun store based on market assumptions in the area. You can change all major values in the assumptions section of the spreadsheet. The spreadsheet also takes into consideration the trend of falling gun popularity in the United States at a rate of -1.5% per year and how New Hampshire compares to the national average. The analysis covers a ten year forecast.
The currently computed weighted average cost of capital (WACC) in the ten year forecast is 10.48% if the company was financed with 46% debt and 54% equity. This debt would include a mortgage for the building and a bank loan for the inventory, assuming an initial starting equity amount of $100,000. With the current assumptions, the computed internal rate of return (IRR) is 11.26%. The spreadsheet compares the 11.26% IRR of the gun store with the average of the S&P 500 for similar investments, which is 18.2%.
Without making adjustments to our assumptions, the net present value of the cash flows of the company including selling the company in ten years is $653,731. Consequently, we feel that the current asking price of $495,000 + $300,000 for inventory ($795,000) is slightly higher than what our assumptions reflect the company is actually worth. Due to this analysis, we feel that a maximum purchase price should be no higher than $429,264.
Additional features that the spreadsheet can analyze are:
1) What would the company look like in bankruptcy
2) The risk and return associated with expanding the Village Gun Store with additional locations