account
Samna
Group4Crossroads2.xlsxBreakeven & Margin of Safety
| Breakeven Carwashes | ||
| Current | Upgrade | |
| Revenue Per Car Wash | $14.00 | $14.00 |
| Variable Costs | ||
| Utilities | $0.78 | $0.78 |
| Chemicals | 0.64 | $0.64 |
| Maintenance | 0.47 | $0.17 |
| Labor | 1.24 | $1.24 |
| Total Variable Costs | $3.13 | $2.83 |
| Contribution Margin | $10.87 | $11.17 |
| Contribution Margin% | 77.64% | 79.79% |
| Fixed Costs | ||
| Owners' Salaries | $1.99 | $1.99 |
| Daughter/Son Salary | $3.58 | $3.58 |
| Insurance | $0.44 | $0.44 |
| Operating Costs | $0.60 | $0.60 |
| Advertising | $0.65 | $0.65 |
| Depreciation | $0.00 | $0.00 |
| Total Fixed Costs | $7.26 | $7.26 |
| Breakeven Carwashes | ||
| Fixed Costs/Contribution Margin Per Car Wash | ||
| Total Fixed Costs | $7.26 | $7.26 |
| Contribution Margin $$ Per Car Wash | $10.87 | $11.17 |
| Breakeven Car Washes | 25,213 | 24,536 |
| Breakeven Sales in Sales Dollars | ||
| Calculation: Breakeven Car Washes x Revenue per Car Wash | ||
| Current | Upgrade | |
| Breakeven Car Washes | 25,213 | 24,536 |
| Revenue Per Car Wash ($$) | $14.00 | $14.00 |
| Breakeven Dollars | $ 352,982 | $ 343,501 |
| Alternative Method for Breakeven Carwashes using CM | ||
| Fixed Costs/Contribution Margin% | ||
| Fixed Costs | $274,065 | $274,065 |
| Contribution Margin Percent | 77.64% | 79.79% |
| Breakeven Dollars | $ 352,982 | $ 343,501 |
| Margin of Safety | ||
| Calculation: Current Revenue - Breakeven Revenue | ||
| Current | Upgrade | |
| Planned Sales | $528,500.00 | $528,500.00 |
| Breakeven Sales | $ 352,982 | $ 343,501 |
| Margin of Safety | $175,518.40 | $184,998.66 |
| Degree of Operating Leverage | ||
| Calculation: Contribution Margin/Operating Income (EBIT) | ||
| Current | Upgrade | |
| Current Carwashes | 37,750 | 37,750 |
| Variable Cost per Unit | $3.1 | $2.8 |
| Revenue | $528,500.00 | $528,500.00 |
| Total Variable Cost | $118,157.50 | $106,832.50 |
| Contribution Margin | $410,342.50 | $421,667.50 |
| Fixed Costs | $274,065 | $274,065 |
| Operating Income Before Tax | $136,277.50 | $147,602.50 |
| Income Tax | ||
| Net Operating Income | $107,659.23 | $147,602.50 |
| Degree of Operating Leverage | 3.81 | 2.86 |
Forecasted After Tax Income
| Forecasted After Tax Operating Income | ||||||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 | Year 9 | Year 10 | |
| Total Car Washes (Units) | 38,883 | 40,049 | 41,250 | 42,488 | 43,763 | 45,076 | 46,428 | 47,821 | 49,256 | 50,734 |
| Sales ($$) | $ 544,362 | $ 560,686 | $ 577,500 | $ 594,832 | $ 612,682 | $ 631,064 | $ 649,992 | $ 669,494 | $ 689,584 | $ 710,276 |
| Variable Costs: | ||||||||||
| Utilities | 30,329 | 31,238 | 32,175 | 33,141 | 34,135 | 35,159 | 36,214 | 37,300 | 38,420 | 39,573 |
| Chemicals | 24,885 | 25,631 | 26,400 | 27,192 | 28,008 | 28,849 | 29,714 | 30,605 | 31,524 | 32,470 |
| Maintenance | 6,610 | 6,808 | 7,012 | 7,223 | 7,440 | 7,663 | 7,893 | 8,130 | 8,374 | 8,625 |
| Labor | 48,215 | 49,661 | 51,150 | 52,685 | 54,266 | 55,894 | 57,571 | 59,298 | 61,077 | 62,910 |
| Total Variable Costs | $ 110,039 | $ 113,339 | $ 116,738 | $ 120,241 | $ 123,849 | $ 127,565 | $ 131,391 | $ 135,333 | $ 139,394 | $ 143,577 |
| Contribution Margin | $ 434,323 | $ 447,347 | $ 460,763 | $ 474,591 | $ 488,833 | $ 503,499 | $ 518,601 | $ 534,161 | $ 550,190 | $ 566,699 |
| CM% | 79.79% | 79.79% | 79.79% | 79.79% | 79.79% | 79.79% | 79.79% | 79.79% | 79.79% | 79.79% |
| Fixed Costs: | ||||||||||
| Owners' Salaries | 75,123 | 75,123 | 75,123 | 75,123 | 75,123 | 75,123 | 75,123 | 75,123 | 75,123 | 75,123 |
| Daughter/Son Salary | 135,145 | 135,145 | 135,145 | 135,145 | 135,145 | 135,145 | 135,145 | 135,145 | 135,145 | 135,145 |
| Insurance | 16,610 | 16,610 | 16,610 | 16,610 | 16,610 | 16,610 | 16,610 | 16,610 | 16,610 | 16,610 |
| Operating Costs | 22,650 | 22,650 | 22,650 | 22,650 | 22,650 | 22,650 | 22,650 | 22,650 | 22,650 | 22,650 |
| Advertising | 24,538 | 24,538 | 24,538 | 24,538 | 24,538 | 24,538 | 24,538 | 24,538 | 24,538 | 24,538 |
| Depreciation | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 |
| Total Fixed Costs | $ 299,065 | $ 299,065 | $ 299,065 | $ 299,065 | $ 299,065 | $ 299,065 | $ 299,065 | $ 299,065 | $ 299,065 | $ 299,065 |
| Total Operating Expenses | $ 409,104 | $ 412,404 | $ 415,803 | $ 419,306 | $ 422,914 | $ 426,630 | $ 430,456 | $ 434,398 | $ 438,459 | $ 442,642 |
| Operating Income Before Tax | $ 135,258 | $ 148,282 | $ 161,698 | $ 175,526 | $ 189,768 | $ 204,434 | $ 219,536 | $ 235,096 | $ 251,125 | $ 267,634 |
| Income Taxes | $ 28,404 | $ 31,139 | $ 33,956 | $ 36,860 | $ 39,851 | $ 42,931 | $ 46,103 | $ 49,370 | $ 52,736 | $ 56,203 |
| Operating Income After Tax | $ 106,854 | $ 117,143 | $ 127,741 | $ 138,666 | $ 149,916 | $ 161,503 | $ 173,433 | $ 185,726 | $ 198,388 | $ 211,431 |
Discounted Cash Flow
| Discounted Cash Flow if Continue to Operate | ||||||||||
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | Year 7 | Year 8 | Year 9 | Year 10 | |
| Cash Inflows (Revenue) | $ 544,362 | $ 560,686 | $ 577,500 | $ 594,832 | $ 612,682 | $ 631,064 | $ 649,992 | $ 669,494 | $ 689,584 | $ 710,276 |
| After-Tax Cash Received on Sale of Business | 1,976,000 | |||||||||
| Net Cash Inflows | $ 544,362 | $ 560,686 | $ 577,500 | $ 594,832 | $ 612,682 | $ 631,064 | $ 649,992 | $ 669,494 | $ 689,584 | $ 2,686,276 |
| Operating Expenses | (409,104) | (412,404) | (415,803) | (419,306) | (422,914) | (426,630) | (430,456) | (434,398) | (438,459) | (442,642) |
| Less Depreciation (Non-cash expense) | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 | 25,000 |
| Income Tax Expense | (28,404) | (31,139) | (33,956) | (36,860) | (39,851) | (42,931) | (46,103) | (49,370) | (52,736) | (56,203) |
| Net Cash Outflows | (412,508) | (418,543) | (424,759) | (431,166) | (437,766) | (444,561) | (451,559) | (458,768) | (466,196) | (473,845) |
| Net Cash Flows | $ 131,854 | $ 142,143 | $ 152,741 | $ 163,666 | $ 174,916 | $ 186,503 | $ 198,433 | $ 210,726 | $ 223,388 | $ 2,212,431 |
| Discount Factors (Present Value of $1.00) | 0.926 | 0.857 | 0.794 | 0.735 | 0.681 | 0.630 | 0.583 | 0.540 | 0.500 | 0.463 |
| Present Value of Net Cash Flows | $ 122,097 | $ 121,817 | $ 121,276 | $ 120,294 | $ 119,118 | $ 117,497 | $ 115,687 | $ 113,792 | $ 111,694 | $ 1,024,355 |
| Less: Equipment Investment | (250,000) | |||||||||
| Net Present Value if Upgraded and Sold in 10 Years | $ 1,837,627 | |||||||||
| Net Cash Flow from Sale Today (Year 0- Now) | ||||||||||
| Net Book Value of Non-cash Assets | $ 30,000 | |||||||||
| Less: Outstanding Liabilities | $ - 0 | |||||||||
| Book Value of Bsiness | $ 30,000 | |||||||||
| Mega's Offer | $ 1,875,000 | |||||||||
| Less: Current Book Value | $ 30,000 | |||||||||
| Pre-tax Gain on Sale | $ 1,845,000 | |||||||||
| Capital Gains Tax Rate | 20% | |||||||||
| Capital Gains Tax | $ 369,000 | |||||||||
| Net Cash Flow From Sale Today | $ 1,506,000 | |||||||||
| Net Present Value - Comparing Both Options | ||||||||||
| Upgrade and Continue Operations | ||||||||||
| Net Present Value if Upgraded and Sold in 10 Years | $ 1,837,627 | |||||||||
| Sale to Mega | ||||||||||
| Net Cash Flow From Sale Today | $ 1,506,000 | |||||||||
| Retirement Savings (Cash Balance) | $ 275,000 | |||||||||
| Less: Outstanding Liabilities | $ - 0 | |||||||||
| Net Cash Flow From Sale Today | $ 1,781,000 | |||||||||
| Net Cash Flow | $ 56,627 | |||||||||
Financials
| Forecast and Financial Data | ||||
| Group 4 | ||||
| Forecast Next 10 Years | ||||
| Current Car Washes (Year 0) | 37,750 | |||
| Annual Growth Car Washes | 3.00% | |||
| Current Revenue Per Car Wash | $14.00 | |||
| Annual Price Increase | 0.00% | |||
| Annual Variable Expense Growth | 0.00% | |||
| Variable Costs (Current) | ||||
| Utilities (Elec/Gas/Water) | $0.78 | |||
| Detergents/Chemicals | 0.64 | |||
| Maintenance Costs | 0.47 | |||
| Site Labor | 1.24 | |||
| Total Variable Costs | $3.13 | |||
| Fixed Costs (Current) | ||||
| Owners' Salary (Combined) | $1.99 | |||
| Daughter's Salary | 1.79 | |||
| Son's Salary | 1.79 | |||
| Insurance | 0.44 | |||
| Operating Costs | 0.6 | |||
| Advertising | 0.65 | |||
| Depreciation | - | |||
| 7.24 | $7.24 | |||
| Total Cost Per Car Wash | $10.37 | |||
| Balance Sheet | ||||
| Current | Year 10 | |||
| Cash | $275,000 | $1,851,219 | ||
| Land | 30,000 | 30,000 | ||
| Building | 65,000 | 65,000 | ||
| Accumulated Depreciation- Building | -65,000 | -65,000 | ||
| Equipment (Current) | 500,000 | 750,000 | ||
| Accumulated Depreciation- Equipment | -500,000 | -750,000 | ||
| Total Assets | $305,000 | $1,881,219 | ||
| Current Liabilities | $0 | $0 | ||
| Common Stock (Current) | 75,000 | 75,000 | ||
| Retained Earnings (Current) | 230,000 | 1,806,219 | ||
| Total Liabilities & Equity | $305,000 | $1,881,219 | ||
| **Except cash no changes in working are expected. | ||||
| Investment/ Tax Information | ||||
| Interest Rate | 8.00% | |||
| Equipment Investment | $250,000 | 25000 | ||
| Useful Life (Years) | 10 | |||
| Salvage Value | $0 | |||
| Maintenance Cost Decrease Per Car Wash | $0.30 | |||
| Mega's Offer (Current) | $1,875,000 | |||
| After Tax Gain on Sale (Current) | $1,476,000 | |||
| Projected Sale Price in 10 Years | $2,500,000 | |||
| After Tax Gain on Sale (After 10 Years) | $1,976,000 | |||
| Long Term Capital Gains Tax Rate | 20.00% | |||
| Corporate Income Tax Rate | 21.00% |
