Star Holiday Travel Experts

Location: Fairfield County, CT

Company Website:

For Sale Website:

Description:

The attached forecast model is for a travel agency located in Fairfield County, Connecticut, which specializes in travel to the Caribbean.  It is currently for sale for $420,000.  This model includes a pro forma income statement and balance sheet for the agency based on market assumptions and an analysis of the costs of capital and internal rate of return forecasted for the agency.  The model allows variables to be changed for all major inputs of the computations, and includes citations for assumed values in the models. The forecast is based on research on costs from the Fairfield County, Connecticut area to the Caribbean.  

In the model with the input values chosen, the agency would have a weighted average cost of capital at about 5.5%, but an internal rate of return equal to only 8.04%.  Realizing that the cost of capital may be adjusted by changing the debt and equity proportions, we have attempted to do so, and we have found that it is not possible for the IRR and the WACC to equal each other.  

The proportion of debt and equity might not be reasonable for someone who may not have that much cash to put down all at once.   We believe that it’s a good idea to invest in the travel agency.  The first two years do not seem like the agency will be making any money, and in the third and fourth year, the agency will not be making much of a profit.  With an IRR of 8.04% and WACC at 5.63%, the agency is receiving a higher rate of return than the amount it costs to invest.