The local ymca is looking to purchase a local business that

Reference no: EM13598059

The local YMCA is looking to purchase a local business that relates to other lines of business they currently have, so they feel it would be a good fit for their current operations as the Board of Directors feels there are a lot of synergies and efficiencies that can be gained.

The following is some information as it relates to buying this business

The YMCA is thinking of buying this business on April 1, 2011. The following will occur if that were the case:

1) The YMCA will have to pay $350,000 to buy the business, but is choosing to make monthly payments of $2,500 over 20 years.

2) The business will have up to 50 customers who would pay $600/month to use their services.

3) The YMCA will have to hire three staff and pay them a salary (including benefits) totaling $7500/month

4) Operating Expenses will total approximately $10,000/month (not including the cost of buying the business in line 1 above)

5) The YMCA will incur $50,000 in expenses to renovate the business if they choose to buy it before they open the door. This will delay opening of business 3 months.

6) The YMCA knows that it will have to replace the roof in year 3. They have received 3 quotes where the average cost of the quotes is $40,000

7) Additionally, the YMCA will allocate 1/2 of their current director's salary to this operation to help run the facility. The monthly salary (including benefits) is $4,000

8) The YMCA, being a non-profit, is a very conservative operation and does not require a large return on its investments, so it considers its cost of capital to be 11%

9) The YMCA thinks it might sell the business after 10 years to someone in the community.

10) The YMCA is a non-profit organization, so ignore income taxes.Calculate the net present value of this project

Reference no: EM13598059

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