Location: Riggins, ID
Attached is a spreadsheet model for the Riverview Motel located in Riggins, Idaho. The motel is currently for sale at a price of $739,000. This model includes forecasted income statements and balance sheets for each of the next ten years, based on assumptions gained from market research and analysis. Some of the assumption discussed include the average occupancy rate of 65.9%, increasing by 0.5% each year following and sales revenue (non-perishable food items and beverages) as 5% of room rental revenue. Another assumption is that cost of goods sold would be 50% of the sales revenue just discussed.
Riggins is a small town with about 400 residents. After doing research, it was determined that the current asking price of $739,000 is too high for Riverview. It was found that a reasonable sale price would be approximately $612,749, which includes goodwill valued at $21,374. We determined this sale price by doing a DCF valuation of the projected free cash flows of the company for the next ten years. In this model, both WACC (weighted average cost of capital) and IRR (internal rate of return) were determined to be 12.28%.