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KARAOKE PUB CAPITAL INVESTMENT ANALYSIS

Beach Karaoke Pub Pro Forma (Self Operate)

Avg Check
Avg Check Growth Rate
Days/Years

64 per day
32 per day
32 per day

Year 0
$

Year 1

283,333
$

1,700,000

Pub Revenues

$4,672,000 Year 1

Total Tables
Table Turns

32
2

Hours of Operation
Costs
F&B Costs
Salaries (1)
Other Operating (2)
Repairs & Maintenance
Depreciation FF&E
- Straight Line
- Salvage
Depreciation Capex

7 hours

25%
0%
22%
10,000
6 Yrs

Sales
Sales
Sales
Year

Total Costs
F&B Costs
Salaries
Other Operating
Repairs & Maintenance

Notes
(1) Assumes 0% of Sales instead of 16% of Sales
because employees are already under a longterm
employment contract with the hotel and, therefore an
irrelevant cost for this scenario.
(2) Assumes Other Operating includes the $55K of
allocated Shared Facility costs assumed in the Planet
Karaoke Pub scenario.

Year 4

Year 5

283,333
$

283,333
$

283,333
$

283,333
$

283,333
-

3,352,000

3,559,200

3,737,180

3,924,024

4,164,845

4,418,487

4,672,000

4,905,600

5,150,880

5,408,424

5,678,845

5,962,787

23,360
$200

23,360
$210
5%

23,360
$221
5%

23,360
$232
5%

23,360
$243
5%

$
25% Sales
0.0% Sales
22% Sales
$10,000 /Yr

Depreciation

2,205,840
1,168,000
1,027,840
10,000

13,464,000
10%
$

283,333

EBIT

$
30%

862,827

2,315,632
1,226,400
1,079,232
10,000

14,137,000
10%
$

283,333
$

258,848

960,235

2,430,914
1,287,720
1,133,194
10,000

14,844,000
10%
$

283,333
$

288,070

1,022,933

2,551,959
1,352,106
1,189,853
10,000

15,140,000
10%
$

283,333
$

306,880

1,088,731

2,679,057
1,419,711
1,249,346
10,000

15,443,000
10%
$

283,333
$

326,619

1,202,455

2,812,510
1,490,697
1,311,813
10,000
283,333

360,736

1,322,644
396,793

Net Income

603,979

672,164

716,053

762,112

841,718

925,851

Operating Cash Flow (OCF)


OCF

887,312

955,498

999,386

1,045,445

1,125,052

1,209,184

Net Working Capital (NWC)


Change in NWC
Project Cash Flows
OCF
Capital Expenditure
Change in NWC
CFFA
Investment Metrics & Decision Criteria
Discount Rate
10.75%
ROI (Average)
102.9%
NPV
$2,641,320
IRR
52.5%
EAV
$619,856
Profitability Index
2.55
Payback
1.85 Yrs
Discounted Payback
2.15 Yrs

$
1,700,000
$ (1,700,000) $

887,312
887,312

-47.8%

PV Fut CFFA

$801,185

955,498
955,498

8.4%

$779,008

999,386
999,386

1,045,445
1,045,445

3.5
29.5%
29.0%
28.4%
27.8%
27.0%
26.1%
25.1%
23.8%

3.0
28.0%
27.4%
26.7%
25.9%
24.9%
23.8%
22.5%
20.8%

EAV ($000)
$619.9
5.75%
6.75%
7.75%

$1,700
$683.9
$671.4
$658.7

$1,800
$663.8
$650.6
$637.2

8.75%
9.75%
10.75%
11.75%
12.75%

$645.9
$632.9
$619.9
$606.7
$593.4

$623.7
$610.1
$596.4
$582.5
$568.6

Profit Index
2.55
5.75%
6.75%
7.75%
8.75%
9.75%
10.75%
11.75%
12.75%

$1,700
2.99
2.90
2.80
2.72
2.63
2.55
2.48
2.41

$1,800
2.83
2.74
2.65
2.57
2.49
2.41
2.34
2.27

EAV ($000)
$619.9
5.75%
6.75%
7.75%
8.75%
9.75%
10.75%
11.75%
12.75%
30.0%
45.0%
60.0%
75.0%
90.0%
105.0%
120.0%
135.0%

0.0%
$1,684.4
$1,670.9
$1,657.3
$1,643.6
$1,629.7
$1,615.8
$1,601.7
$1,587.6
$1,329.9
$1,090.8
$843.5
$591.3
$336.5
$80.1
-$177.0
-$434.4

23,360
$255
5%

$ (1,320,000) $ (1,346,400) $ (1,413,700) $ (1,484,400) $ (1,514,000) $ (1,544,300)


13,200,000
10%

NI%
18.0%
38
36
34
32
30
28
26
24

Year 6

Projected Rooms Revenue


Erosion Rate

Less: Tax
$0.00
6 Yrs

Covers/Year
Avg Check
Avg Check Growth
Rooms Revenue Erosion

Total Sales

Year 3

1,700,000

Pro Forma Income Statement


Total Revenues less Erosion

$200 each
5% per year
365

Year 2

1,125,052
1,125,052

No. of Tables

Pro Forma Cash Flow


Capital Investment
Capital Expenditure
Depreciation
Salvage (after tax 30%)
Capital Expenditure

Discount Rate

50%
50%

High
1,200,000
900,000
2,100,000

Discount Rate

Sales
Total Covers
Walk-Ins
Hotel Guests

Low
800,000
900,000
1,700,000

1,209,184
1,209,184

67.2%

128.7%

194.9%

266.0%

$735,703

$694,907

$675,233

$655,285

Discount Rate

Capital Expenses
Capital Expenditure
FF&E
Total Capital Expenditure

Table Turns
2.5
2.0
25.7%
22.0%
24.9%
20.8%
24.0%
19.5%
22.9%
18.0%
21.7%
16.2%
20.2%
14.0%
18.4%
11.3%
16.2%
7.8%

1.0
-6.9%
-11.8%
-17.9%
-25.9%
-36.4%
-51.2%
-73.6%
-111.0%

1.0
-6.9%
-11.8%
-17.9%
-25.9%
-36.4%
-51.2%
-73.6%
-111.0%

Capital Expenditure ($000)


$1,900
$2,000
$2,100
$643.6
$623.4
$603.2
$629.7
$608.9
$588.1
$615.7
$594.3
$572.8

$2,200
$583.1
$567.3
$551.3

$601.6
$587.3
$572.9
$558.4
$543.7

$579.5
$564.5
$549.5
$534.2
$518.9

$557.4
$541.7
$526.0
$510.1
$494.0

$535.2
$519.0
$502.5
$485.9
$469.2

Capital Expenditure ($000)


$1,900
$2,000
$2,100
2.68
2.54
2.42
2.59
2.46
2.35
2.51
2.38
2.27
2.43
2.31
2.20
2.36
2.24
2.13
2.28
2.17
2.07
2.22
2.11
2.01
2.15
2.04
1.95

$2,200
2.31
2.24
2.17
2.10
2.03
1.97
1.91
1.86

Erosion Rate of Guest Rooms Revenue


5.0%
10.0%
15.0%
20.0%
$1,184.2 $683.9
$183.7
-$316.5
$1,171.1 $671.4
$171.6
-$328.2
$1,158.0 $658.7
$159.4
-$339.9
$1,144.7 $645.9
$147.0
-$351.8
$1,131.3 $632.9
$134.5
-$363.9
$1,117.8 $619.9
$121.9
-$376.1
$1,104.2 $606.7
$109.2
-$388.4
$1,090.5 $593.4
$96.3
-$400.8
$839.4
$349.0
-$141.4
-$631.8
$605.0
$119.2
-$366.6
-$852.4
$361.3
-$120.8
-$602.9 -$1,085.0
$112.1
-$367.1
-$846.3 -$1,325.5
-$140.4
-$617.2 -$1,094.1 -$1,571.0
-$394.8
-$869.8 -$1,344.8 -$1,819.8
-$650.4 -$1,123.8 -$1,597.3 -$2,070.7
-$906.6 -$1,378.8 -$1,850.9 -$2,323.1

25.0%
-$816.7
-$827.9
-$839.2
-$850.7
-$862.3
-$874.0
-$885.9
-$897.9
-$1,122.2
-$1,338.2
-$1,567.2
-$1,804.7
-$2,047.8
-$2,294.8
-$2,544.2
-$2,795.3

KARAOKE PUB CAPITAL INVESTMENT ANALYSIS


Planet Karaoke Pub Pro Forma (Lease)

$170,000 per Month


0%
5%

Capital Investment
Capital Expenditure
Depreciation
Salvage (after tax 30%)
Capital Expenditure

770,000

Pro Forma Income Statement


Total Lease Proceeds less Erosion

Depreciation FF&E
- Straight Line
- Salvage
Depreciation Capex

Lease Proceeds
Costs
Pro Rata Shared Facilities
Repairs & Maintenance

720,000

$ 2,040,000

192,500
$

Rooms Revenue Erosion

4 Yrs
$0.00
4 Yrs

693,600

728,300

192,500
$

EAV ($000)
$272.6
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%

$200
$556.2
$544.6
$533.1
$521.6
$510.2
$498.9
$487.7
$476.5

Base Lease Monthly Payment ($000)


$190
$180
$170
$160
$468.2
$380.2
$292.2
$204.3
$457.2
$369.8
$282.4
$195.0
$446.2
$359.4
$272.6
$185.8
$435.4
$349.1
$262.9
$176.6
$424.6
$338.9
$253.2
$167.5
$413.8
$328.7
$243.6
$158.5
$403.2
$318.6
$234.0
$149.5
$392.5
$308.5
$224.5
$140.5

$150
$116.3
$107.6
$98.9
$90.4
$81.8
$73.3
$64.9
$56.5

EAV ($000)
$272.6
5.75%

$770
$299.2

$800
$290.5

Capital Expenditure ($000)


$850
$900
$950
$276.2
$261.9
$247.5

$1,000
$233.2

6.75%
7.75%
8.75%
9.75%
10.75%
11.75%
12.75%

$293.9
$288.6
$283.3
$278.0
$272.6
$267.2
$261.7

$285.1
$279.6
$274.1
$268.6
$263.0
$257.3
$251.7

Profit Index
2.10
5.75%
6.75%
7.75%
8.75%
9.75%
10.75%
11.75%
12.75%

$770
2.35
2.30
2.25
2.20
2.15
2.10
2.06
2.02

$800
2.27
2.21
2.16
2.12
2.07
2.03
1.98
1.94

EAV ($000)
$272.6
5.75%
6.75%
7.75%
8.75%
9.75%
10.75%
11.75%
12.75%
50.0%
75.0%
100.0%
125.0%
150.0%
175.0%
200.0%
225.0%

0.0%
$1,270.2
$1,264.5
$1,258.8
$1,253.0
$1,247.3
$1,241.4
$1,235.6
$1,229.7
$991.7
$818.1
$638.2
$454.3
$267.7
$79.4
-$110.0
-$300.2

Year 6

764,700

$ 2,142,000

$ 2,249,100

0%

5%

5%

$ (1,320,000) $ (1,346,400) $ (1,413,700) $ (1,484,400)

Projected Rooms Revenue


Erosion Rate

13,200,000
10%

Total Costs
Shared Facilities
$55,000 /Yr
Repairs & Maintenance $10,000 /Yr

Depreciation

65,000
55,000
10,000

13,464,000
10%
$

192,500

EBIT
Less: Tax

192,500

$ 2,040,000

Pmt Annual Growth Rate


55,000 Year
10,000 Year

Year 5

770,000
192,500

Year 4

$
30%

462,500

65,000
55,000
10,000

14,137,000
10%
$

192,500
$

138,750

436,100

65,000
55,000
10,000

14,844,000
10%
$

192,500
$

130,830

470,800

65,000
55,000
10,000

141,240

507,200
152,160

323,750

305,270

329,560

355,040

Operating Cash Flow (OCF)


OCF

516,250

497,770

522,060

547,540

Project Cash Flows


OCF
Capital Expenditure
Change in NWC
CFFA
Investment Metrics & Decision Criteria
Discount Rate
10.75%
ROI (Average)
67.2%
NPV
$850,233
IRR
55.5%
EAV
$272,591
Profitability Index
2.10
Payback
1.49 Yrs
Discounted Payback
1.65 Yrs

$
770,000
(770,000) $

516,250
516,250

-33.0%

PV of CFFA

$466,140

497,770
497,770

31.7%

$405,827

522,060
522,060

$270.4
$264.6
$258.8
$252.9
$246.9
$241.0
$234.9

$255.8
$249.6
$243.4
$237.2
$230.9
$224.6
$218.2

$241.1
$234.6
$228.1
$221.5
$214.9
$208.2
$201.5

$226.4
$219.6
$212.7
$205.8
$198.9
$191.8
$184.8

192,500

Net Income

Net Working Capital (NWC)


Change in NWC

Discount Rate

High
1,000,000
1,000,000

Year 3

Discount Rate

Lease Proceeds
Base Lease Payment
Growth Rate Years 1-2
Growth Rate Years 3-4

Low
770,000
770,000

Year 2

Capital Expenditure ($000)


$850
$900
$950
2.13
2.01
1.91
2.08
1.97
1.86
2.04
1.92
1.82
1.99
1.88
1.78
1.95
1.84
1.74
1.91
1.80
1.71
1.87
1.76
1.67
1.83
1.72
1.63

$1,000
1.81
1.77
1.73
1.69
1.66
1.62
1.59
1.55

547,540
547,540

99.5%

170.6%

$384,317

$363,949

Discount Rate

Capital Expenses
Capital Expenditure
FF&E
Total Capital Expenditure

Year 1

Lease Growth Rate

Year 0

Erosion Rate of Guest Rooms Revenue


5.0%
10.0%
15.0%
20.0%
$784.7
$299.2
-$186.4
-$671.9
$779.2
$293.9
-$191.4
-$676.7
$773.7
$288.6
-$196.4
-$681.5
$768.2
$283.3
-$201.5
-$686.4
$762.6
$278.0
-$206.7
-$691.3
$757.0
$272.6
-$211.8
-$696.2
$751.4
$267.2
-$217.0
-$701.2
$745.7
$261.7
-$222.3
-$706.3
$514.0
$36.3
-$441.4
-$919.1
$343.3 -$131.5
-$606.3 -$1,081.2
$165.5 -$307.2
-$779.8 -$1,252.5
-$16.8
-$487.8
-$958.9 -$1,429.9
-$202.1 -$671.8 -$1,141.6 -$1,611.4
-$389.3 -$858.1 -$1,326.9 -$1,795.7
-$578.0 -$1,045.9 -$1,513.9 -$1,981.9
-$767.5 -$1,234.9 -$1,702.2 -$2,169.5

25.0%
-$1,157.4
-$1,162.0
-$1,166.6
-$1,171.2
-$1,175.9
-$1,180.7
-$1,185.4
-$1,190.3
-$1,396.8
-$1,556.0
-$1,725.2
-$1,900.9
-$2,081.2
-$2,264.4
-$2,449.9
-$2,636.8

KARAOKE PUB CAPITAL


INVESTMENT ANALYSIS
Pro Forma Summaries

Beach Karaoke Pub Pro Forma (Self Operate)


Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

283,333
-

283,333
-

283,333
-

283,333
-

283,333
-

283,333
-

3,352,000
2,205,840
283,333

3,559,200
2,315,632
283,333

3,737,180
2,430,914
283,333

3,924,024
2,551,959
283,333

4,164,845
2,679,057
283,333

4,418,487
2,812,510
283,333

EBIT

862,827

960,235

1,022,933

1,088,731

1,202,455

1,322,644

Less: Tax

258,848

288,070

306,880

326,619

360,736

396,793

Net Income

603,979

672,164

716,053

762,112

841,718

925,851

Operating Cash Flow (OCF)


OCF

887,312

955,498

999,386

1,045,445

1,125,052

1,209,184

Capital Investment
Capital Expenditure
Depreciation
Salvage (after tax 30%)
Capital Expenditure

1,700,000
1,700,000

Pro Forma Income Statement


Total Revenues less Erosion
Total Costs
Depreciation

Net Working Capital (NWC)


Change in NWC

Project Cash Flows


OCF
Capital Expenditure
Change in NWC
CFFA

1,700,000
(1,700,000)

887,312
887,312

955,498
955,498

999,386
999,386

1,045,445
1,045,445

1,125,052
1,125,052

1,209,184
1,209,184

$2,100
$603.2
$588.1
$572.8
$557.4
$541.7
$526.0
$510.1
$494.0

$2,200
$583.1
$567.3
$551.3
$535.2
$519.0
$502.5
$485.9
$469.2

Discount Rate

Investment Metrics & Decision Criteria


Discount Rate
10.75%
ROI (Average)
102.9%
NPV
$2,641,320
IRR
52.5%
EAV
$619,856
Profitability Index
2.55
Payback
1.9 Yrs
Discounted Payback
2.2 Yrs

EAV ($000)
$619.9
5.8%
6.8%
7.8%
8.8%
9.8%
10.8%
11.8%
12.8%

$1,700
$683.9
$671.4
$658.7
$645.9
$632.9
$619.9
$606.7
$593.4

$1,800
$663.8
$650.6
$637.2
$623.7
$610.1
$596.4
$582.5
$568.6

BEACH KARAOKE
Capital Expenditure ($000)
$1,900
$2,000
$643.6
$623.4
$629.7
$608.9
$615.7
$594.3
$601.6
$579.5
$587.3
$564.5
$572.9
$549.5
$558.4
$534.2
$543.7
$518.9

KARAOKE PUB CAPITAL


INVESTMENT ANALYSIS
Pro Forma Summaries

Planet Karaoke Pub Pro Forma (Lease)


Capital Investment
Capital Expenditure
Depreciation
Salvage (after tax 30%)
Capital Expenditure

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

770,000
770,000

192,500
-

192,500
-

192,500
-

192,500
-

Pro Forma Income Statement


Total Revenues less Erosion
Total Costs
Depreciation

720,000
65,000
192,500

693,600
65,000
192,500

728,300
65,000
192,500

764,700
65,000
192,500

EBIT

462,500

436,100

470,800

507,200

Less: Tax

138,750

130,830

141,240

152,160

Net Income

323,750

305,270

329,560

355,040

Operating Cash Flow (OCF)


OCF

516,250

497,770

522,060

547,540

Net Working Capital (NWC)


Change in NWC

$950
$247.5
$241.1
$234.6
$228.1
$221.5
$214.9
$208.2
$201.5

$1,000
$233.2
$226.4
$219.6
$212.7
$205.8
$198.9
$191.8
$184.8

Project Cash Flows


OCF
Capital Expenditure
Change in NWC
CFFA

770,000
(770,000)

516,250
516,250

497,770
497,770

Discount Rate

Investment Metrics & Decision Criteria


Discount Rate
ROI (Average)
NPV
IRR
EAV
Profitability Index
Payback
Discounted Payback

EAV ($000)
$272.6
5.8%
6.8%
7.8%
8.8%
9.8%
10.8%
11.8%
12.8%

$770
$299.2
$293.9
$288.6
$283.3
$278.0
$272.6
$267.2
$261.7

$800
$290.5
$285.1
$279.6
$274.1
$268.6
$263.0
$257.3
$251.7

522,060
522,060

547,540
547,540

10.75%
67.2%
$850,233
55.5%
$272,591
2.10
1.5 Yrs
1.7 Yrs
PLANET KARAOKE
Capital Expenditure ($000)
$850
$900
$276.2
$261.9
$270.4
$255.8
$264.6
$249.6
$258.8
$243.4
$252.9
$237.2
$246.9
$230.9
$241.0
$224.6
$234.9
$218.2

KARAOKE PUB CAPITAL


INVESTMENT ANALYSIS
Pro Forma Summaries

Bundled/Combined
Year 0
Capital Investment
Capital Expenditure
Depreciation
Salvage (after tax 30%)
Capital Expenditure

930,000
930,000

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

90,833
-

90,833
-

90,833
-

90,833
-

283,333
-

283,333
-

Pro Forma Income Statement


Total Revenues less Erosion
Total Costs
Depreciation

2,632,000
2,140,840
90,833

2,865,600
2,250,632
90,833

3,008,880
2,365,914
90,833

3,159,324
2,486,959
90,833

4,164,845
2,679,057
283,333

4,418,487
2,812,510
283,333

EBIT

400,327

524,135

552,133

581,531

1,202,455

1,322,644

Less: Tax

120,098

157,240

165,640

174,459

360,736

396,793

Net Income

280,229

366,894

386,493

407,072

841,718

925,851

Operating Cash Flow (OCF)


OCF

371,062

457,728

477,326

497,905

1,125,052

1,209,184

Net Working Capital (NWC)


Change in NWC

Project Cash Flows


OCF
Capital Expenditure
Change in NWC
CFFA

930,000
(930,000)

371,062
371,062

457,728
457,728

Investment Metrics & Decision Criteria


Discount Rate

Discount Rate

NPV
IRR
EAV

Bundled
EAV ($000)
$347.3
5.75%
6.75%
7.75%
8.75%
9.75%
10.75%
11.75%
12.75%

477,326
477,326

497,905
497,905

1,125,052
1,125,052

1,209,184
1,209,184

10.75%
$1,791,087
50.8%
$347,265

0.0%
$414.2
$406.4
$398.5
$390.5
$382.5
$374.3
$366.1
$357.9

BUNDLED/COMBINED
Guest Room Revenue Erosion Rate
5.0%
10.0%
15.0%
20.0%
$399.5
$384.8
$370.1
$355.4
$391.9
$377.5
$363.0
$348.5
$384.3
$370.0
$355.8
$341.6
$376.5
$362.5
$348.5
$334.5
$368.7
$354.9
$341.2
$327.4
$360.8
$347.3
$333.7
$320.2
$352.8
$339.5
$326.2
$312.9
$344.8
$331.7
$318.6
$305.5

25.0%
$340.7
$334.1
$327.3
$320.5
$313.6
$306.6
$299.6
$292.4

KARAOKE PUB CAPITAL INVESTMENT ANALYSIS


Equivalent 12YR Investment Term
Beach Karaoke Pub Pro Forma (Self Operate)

Year 0

First Investment
Second Investment

(1,700,000)

Total Cash Flow


Capital Account Balance
ROI (Annual)

(1,700,000)
1,700,000

ROI (Average)
NPV
IRR
Profitability Index
Discount Rate

Planet Karaoke Pub Pro Forma (Lease)


First Investment
Second Investment
Third Investment
Total Cash Flow
Captial Account Balance
ROI (Annual)
ROI (Average)
NPV
IRR
Profitability Index
Discount Rate

Year 1
887,312

Year 2
955,498

Year 3
999,386

Year 4

Year 5

1,045,445

1,125,052

Year 6

Year 7

Year 8

Year 9

Year 10

Year 11

Year 12

1,209,184
(1,700,000)

887,312

955,498

999,386

1,045,445

1,125,052

1,209,184

887,312
1,700,000
-47.8%

955,498
1,700,000
8.4%

999,386
1,700,000
67.2%

1,045,445
1,700,000
128.7%

1,125,052
1,700,000
194.9%

(490,816)
3,400,000
83.0%

887,312
3,400,000
109.1%

955,498
3,400,000
137.2%

999,386
3,400,000
166.6%

1,045,445
3,400,000
197.3%

1,125,052
3,400,000
230.4%

1,209,184
3,400,000
266.0%

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Year 11

Year 12

547,540
(770,000)
(222,460)
2,310,000
80.4%

516,250
516,250
2,310,000
102.7%

497,770
497,770
2,310,000
124.3%

522,060
522,060
2,310,000
146.9%

547,540
547,540
2,310,000
170.6%

128.4%
4,072,712
52.5%
3.40
10.75%

Year 0
(770,000)

(770,000)
770,000

88.6%
1,791,037
55.5%
3.33
10.75%

516,250

516,250
770,000
-33.0%

497,770

497,770
770,000
31.7%

522,060

522,060
770,000
99.5%

547,540
(770,000)

516,250

497,770

522,060

(222,460)
1,540,000
35.3%

516,250
1,540,000
68.8%

497,770
1,540,000
101.1%

522,060
1,540,000
135.0%