Location: Connellsville, PA
This model is for the Ice Mine ice skating and roller skating facility in Connellsville, Pennsylvania. The facility is currently listed on the market for $2,790,000. The complex includes an official size ice-rink and a large roller-rink. Three party rooms are available for rental use. There are seven employees needed to run the day to day operations of Ice Mine. The average hourly wages are included in the forecast.
The spreadsheet contains a pro forma income statement and balance sheet for the facility based on assumptions of the market for facilities of this kind and assumptions of the specific area of Connellsville, Pennsylvania. We have included the WACC (weighted average cost of capital) and the internal rate of return. We have also calculated a high and low forecast based on differing market conditions. The model was made to account for changes in certain variables such as people per year, percent of revenue operational expense, etc.
In our model with the values that we chose, the weighted average cost of capital and internal rate of return are at 4.8%. This was calculated using a 92% proportion debt to 8% proportion equity. The purchase price of the building was $2,070,000. We believe that the sales price of the facility is highly overpriced given the market and the calculations computed above. We calculated the total price of all of the assets at fair market value to be approximately $2,600,000. However, the market for these types of assets is almost non-existent, therefore we believe that an appropriate purchase price would be $2,500,000. We believe a discount on the purchase price is reasonable given the fact that there is virtually no goodwill tied with the complex.
The cost of admission accounted for inflation and we raised the prices by an average of 2% per year. We assumed that 75% of the customers who come would rent either roller skates or ice skates. Utilities expense is the largest expense based on the average hours per year the facility is used multiplied by the average price per kilowatt hour. The financing rates for this project were calculated using standard business rates.
After careful review of the financial statements we forecasted, we believe that Ice Mine should have a purchase price of $2,500,000. This would allow the investors and the owners to be satisfied with their expected returns.