Location: Sandpoint, ID
Attached is a spreadsheet model that contains a valuation of a bowling alley in Sandpoint, Idaho. The Bowling alley was established in 1976 and is called Huckleberry Lanes. The company is currently listed for sale for $549,000 on bizbuysell.com. This model contains a forecasted income statement and balance sheet based on information from Huckleberry Lanes’ website, gathered industry research, and market assumptions concerning bowling and costs of operation. Also included is a calculation for cost of capital based on current market conditions and assumed debt attached to the company. The model allows for all inputs to be changed based on actual known user data in order to receive a more accurate depiction of the company’s current economic standing.
Based on the assumed input values, we estimated that the weighted average cost of capital (WACC) would be 8.65%, and the internal rate of return would be 7.87%. This rate of return is obtained through an initial investment of $638,425. For this reason, we believe that the listing price is more than reasonable. In fact, we believe that, based on our assumptions, the listing price could be posted as high as $600,000. These assumptions consider a projected debt of 80% and equity of 20%.
Also included is an analysis considering a substantial addition of two extra lanes and the revenue that would result from that renovation option. Another option that is included is the value of an option to buy Huckleberry Lanes for the same price two years later. From these analyses, we drew the conclusion that it would be best to simply maintain the lanes and forego any major renovations or delay in purchase.