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Please help with ALL parts of the question. Thanks in advance! 1. You are looking to buy a Frozen Yogurt store and are looking at
Please help with ALL parts of the question. Thanks in advance!
1. You are looking to buy a Frozen Yogurt store and are looking at the financials of a prospective store (see below). You are a little skeptical of the financials and do some analysis in order to "normalize" the figures. You conclude that if you had to hire in the open would have to pay $50,000. You determine that the owners spouse actually worked a lot more in the store than she was paid for and the reasonable market value of her labor services is S30,000. Your further look up rent on comparable commercial properties and conclude that the market rent for the store is actually $40,000 (The owner actually owns the current building and thus the company currently pays below market rent). market to replace the owner as manager, you Revenue Cost of Goods Sold Gross Profit 2016 1,000,000 $ 600,000 $400,000 Expenses 30,000 $10,000 Owners Sala Rent Salary of Spouse Other Expenses $ 100,000 $140,000 Total Expenes Net Income S 260,000 A. (2 points) What is the normalized net income of Frozen Yogurt Store? B. (2 points) After normalizing the financials, you want to figure out what price you would like to pay for the store. You have determined that the appropriate capitalization rate is 30%? what would the business be worth if you used the income approach (assume no discount for marketability or lack of control)? C. (2 points) You also saw that similar stores in California have sold for price per revenue multiple of 0.45. What would the business be worth using the market approach? 2. (2 points) If you were purchasing a company, what information would you want to review while performing your due diligenceStep by Step Solution
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