Location: Isla Vista, CA
The Isla Vista bike shop is located in Isla Vista, California. Their operations include bike sales, bike rentals, parts and accessories, and service/repairs. Currently, the shop is listed for sale for $69,000. It is a small business, owned by a local businessman who leases a property with a great location close to a college campus that supplies the majority of demand.
This spreadsheet model includes a 10-year pro forma which includes: an income statement, balance sheet, free cash flow statement, expansion options, hypothetical bankruptcy, internal and external IRR calculations, weighted average cost of capital, and good or bad market outcome prediction.
The spreadsheet models included are based on the assumption that the new owner will purchase the land and buildings instead of leasing them as the previous owner did.
We also included the opportunity to expand the operation, which would accompany the forecast for a positive market. The potential for a negative market is taken into consideration and a forecast has been developed that shows the expected returns for external creditors and investors in the case of bankruptcy.
Based on our analysis, the internal rate of return is 11.3% with a weight average cost of capital of 11.2%. We would recommend the purchase of this growing business.