Location: Del Norte, CO
The attached spreadsheet is a ten year projected forecast for Colorado Cowgirls, a novelty furniture and antique shop that is for sale in Del Norte, CO for $250,000. The projection includes an income statement and balance sheet. It also contains the free cash flows, a calculated weighted average cost of capital, and an internal rate of return. The forecast includes good, medium, and bad market conditions with options. This model is set to adjust 95% of the data in the beginning lines of the spreadsheet. The rest has to be manually changed (i.e. Discretionary Funds Needed).
In the forecast, an internal rate of return was computed at 7.62% with a weighted average cost of capital of 7.20%.With this current WACC, the company has 40% debt and 60% equity. The analysis shows that the current sale price of $250,000 is fair if the building is included in that price, otherwise it is overvalued. Excluding the building, the analysis shows that the appropriate price for Colorado Cowgirls is $85,000.
The three option scenarios include the addition of a parking lot for weekend sales at the store. Associated with this option is the spreadsheet labeled “New Mortgage”, which details this addition. The spreadsheet labeled “Good” shows the results of this addition in a favorable market. Furthermore, the “Options” sheet is connected to each of the “Good,” “Medium,” and “Bankrupt” sheets.