Reference no: EM133139266

Question - Zoe has about $100,000 saved to add to her company pension. Classic's owner has provided her with unaudited financial statements that show average (November - December 2019) monthly revenues of $20,000 and monthly expenses of rent ($2,500), insurance ($200), utilities ($300), two part-time employees (each $2,000 month), advertising ($300), and miscellaneous ($200). The average dollar value of each sale is $20 with an average cost to Classics of $9. The strip mall where the store is located is near the University campus and there are four years remaining of the five-year rental agreement.

The 2019 unaudited financial statements show that the business has a value of $90,000 (including inventory: 70% books, 20% hobby supplies, and 10% cards/gifts) but your friend thinks she may be able to buy it at a $10,000 discount because the current owners are very eager to move to Ontario to be closer to their young grandchildren.

Finally, the current discount rate of 10% is expected to stay the same for the next four years.

She has asked you to help her evaluate this business opportunity. Briefly (in point form) analyze and discuss this business opportunity in the bookstore industry, paying attention to attractiveness and growth potential, finances, and other advice to your friend.