Scuba Store Example 2:
Zero Percent financing
Year 1:
To minimize the amount paid, a scuba shop obtains 11-month, 0% financing for its 8-week ownership share through Sterling Impression, making 11 monthly $1,500 payments with an $8,500 down payment. Maintenance fees are $78 each month. The shop rents all 8 weeks to individual customers at $1000 per week. [$8000 -(($1,500x11) + ($8500) + ($78x12))].
Year 1 cash flow = -$17,936.
Years 2 & 3:
The shop pays $936 for one year of maintenance fees. [$78x12] The 4 weeks of lodging are rented to individual customers for $4000. The remaining 4 weeks are combined for a shop-sponsored dive trip to Cayman Brac for 16 customers who are each charged $400 for lodging, yielding $6,400 income. Annual cash flow = +$9,464, which is more than enough to reimburse the original investment.
Year 4 and beyond:
The shop only has to rent one week each year to cover the annual maintenance fee. All other weeks rented or used represent profit!
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