Problem
1) In-depth valuation estimate for Spaceman using the Asset Method (liquidation of assets).
2) In-depth valuation estimate for Spaceman using the Income Method (Value = Expected annual benefit stream/Required rate of return) by estimating your free cash flow and capitalization rate (Discount rate - Growth) using the following assumptions in the calculations:
a) The calculation will be for 100% of the business for a valuation date of 05/31/2018
b) Assume the replacement salary and benefits for a manager to do the work of the owner would be $100,000
c) Assume the tax rate is 21%
d) Assume there is average risk for the Company-Specific Risks
Also:
i. What do you think an acceptable range of value would for a purchase?
ii. What seller add-backs would you accept? Why?
iii. What red flags and potential risks do you see? How could you mitigate them?
iv. What areas could you improve and how could you grow the business?