Business for Sale! Glancing through The Wall Street Journal recently, you came across the following business opportunity:

You have $150,000 to invest, and you wonder if this might not be a good business opportunity. Analyze this potential investment, and address the following issues:

a. You are dissatisfied with the current level of revenue.
What can you do to improve the revenue stream?

b. After careful analysis and planning a few strategic changes, you determine the expected cash inflows (after taxes) for the business for the next five years should rise to the following:

If your cost of capital is 8 percent, determine whether this business is a good investment based on a present-value analysis.

c. What makes this firm vulnerable to competitors?

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Type of Business: Location: Market: Population: Overview: Monthly newsletter Isle of Mancala Local residents, upscale, approximately 1,200 subscribers 97,000 residents on the island Owned by an individual on the main- land who devotes part time to the news- letter. The newsletter employs an advertising manager who sells ads, and it contracts with freelance writers to write stories. The subscribers pay $34.95 annually. The newsletter has a renewal rate of 58% to 70%. Price: $150,000 Financial Information: 1998 1999 2000 Gross revenue $57,800 $86,400 $98,300 After-tax cash inflows 18,200 16,500 17,000