Financial analysis

 Financial Analysis
Casey's Gym and Aquatics Center will require $4,500,000 for start up costs. The company has attained $1,500,000 in investments from the use of the owners social capital. The remaining $3,000,000 will be sought out using loans.

Financing

·        Amortization period: 30 years

·        Interest rate: 6.5%

·        Acquisition costs: 3,585,000

·        “Going in” cap rate: 9%
      Debt coverage ratio: 1.27
          
          

           Selling costs: 250,000

·         “Residual” cap rate: 6%

      Selling price: $4,388,380
      Loan balloon payment: $1,050,000
    
     Selling price is based of the assumption that the value of the property will increase over the 10 year period as a result of changes in price levels, renovations, and all fixtures that will be needed.

     
      (at 9% RRR)                  Most likely        Worst            Best

      NPV

      Leveraged                    2,867,917        61,965        6,250,128

      Un-Leveraged              111,360        -1,686,591       4,501,571

      IRR

      Leveraged                       30%               10%              50%

      Un-Leveraged                 13%               0%                24%
   
    Through this analysis of the NPV's and IRR's, we can see that using leveraged funds would provide the highest expectation for return and value. The high IRR's are attributable to the expectation of potential gross income which is derived from the revenues of membership dues and the various services the club will offer.

 

Most Likely	1	2	3	4	5	6	7	8	9	10
PGI	950,000	1187500	1425000	1638750	1802625	1982888	2181176	2399294	2639223	2903146
VL	-50,000	-35,000	0	0	0	0	0	0	0	0
EGI	900,000	1,152,500	1,425,000	1,638,750	1,802,625	1,982,888	2,181,176	2,399,294	2,639,223	2,903,146
OE	-652,680	-701631	-754253	-810822.3244	-871634	-937007	-1007282	-1082828	-1164040	-1251343
NOI	247,320	450,869	670,747	827,928	930,991	1,045,881	1,173,894	1,316,466	1,475,183	1,651,802
DS	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000
BTCF	52,320	255,869	475,747	632,928	735,991	850,881	978,894	1,121,466	1,280,183	1,456,802

 

Worst	1	2	3	4	5	6	7	8	9	10
PGI	900,000	1080000	1134000	1190700	1250235	1312747	1378384	1447303	1519668	1595652
VL	0	0	0	0	0	0	0	0	0	0
EGI	900,000	1,080,000	1,134,000	1,190,700	1,250,235	1,312,747	1,378,384	1,447,303	1,519,668	1,595,652
OE	-652,680	-685314	-719579.7	-755559	-793337	-833003	-874654	-918386.3	-964305.6	-1012521
NOI	247,320	394,686	414,420	435,141	456,898	479,743	503,730	528,917	555,363	583,131
DS	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000
BTCF	52,320	199,686	219,420	240,141	261,898	284,743	308,730	333,917	360,363	388,131

Best	1	2	3	4	5	6	7	8	9	10	11
PGI	999,680	1,725,000	2,070,000	2,277,000	2,504,700	2,755,170	3,030,687	3,333,755	3,667,131	4,033,844	4437228
VL	-50,000	-35,000	0	0	0	0	0	0	0		0
EGI	949,680	1,690,000	2,070,000	2,277,000	2,504,700	2,755,170	3,030,687	3,333,755	3,667,131	4,033,844	4,437,228
OE	-652,680	-750,582	-825,640	-908204	-999024	-1098927	-1208820	-1329701	-1462672	-1608939	-1769833
NOI	297,000	939,418	1,244,360	1,368,796	1,505,676	1,656,243	1,821,867	2,004,054	2,204,459	2,424,905	2,667,396
DS	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000	-195,000
BTCF	102,000	744,418	1,049,360	1,173,796	1,310,676	1,461,243	1,626,867	1,809,054	2,009,459	2,229,905

    The potential gross income is shown above with growth expected at an average increase of 10% depending on worst, best and most likely patterns. The first two years is expected to recieve the most growth so those increses are around 20%.
    Operating expenses are based of an average increase of 10% to compensate for changes in price level and the extra expenses due to growth of the club.