Location: San Diego, CA
The Birch North Park Theatre is located in the heart of San Diego. The theatre has been bringing plays, performances, and other live productions to San Diego since 1928. Being the only theatre of its size, 730 seats, it is becoming an attraction for not only those from the community, but to sightseers near and far.
The spreadsheet attached includes a pro forma forecast, a balance sheet, and a free-cash-flows (FCFs) forecast. This model provides a cost of capital estimate that is based on market assumptions and forecasts current debt and current equity. The FCFs show the operating income in each year, the cash expenditures, changes in working capital from year to year, and a cash inflow from a hypothetical disposition of all plant assets at the end of the forecast. It also allows us to calculate the business’ internal rate of return. The FCFs derived from the income statement and balance sheet have been forecasted for the possibility of having a good market, bad market, or average market. From these numbers, we are able to obtain the net present value (NPV) for each scenario, and using assumptions from market behavior, each scenario has been assigned a probability. Using each scenario’s NPV and the probability assigned, the expected value of the entire business can be found.
Also included in this forecast, is an option to build upon the business. If the market for the Birch North Park Theatre is “good”, then the theatre could have an option to build another parking lot near its lot, increasing the cash flows and expected value of the entire business. If the market is bad for the theatre, they may choose to not include the option and continue in normal operations. This option affects the expected value of the business as well.
The overall expected value for the Birth North Park Theatre according to our model is $335,205. Beginning with fairly positive numbers, the business was forecasted to have an extremely favorable outcome. As we made the revenues and expenses more modest and appropriate, the expected value was reduced, but still positive. We would encourage anyone to invest in this theatre.