Title: The Scoot$-$Ease Acquisition

$1.$ Introduction

Fresh out of the Carson College of Business, Amiya Perez stepped into her role as a financial analyst at Forage, a respected information technology conglomerate, equipped with ambition and an impressive educational background. Before she could even get accustomed to her new office chair, she was assigned a complex and high$-$stakes task $$ to perform analysis that would be presented to the board of directors by her direct supervisor. The analysis would be an assessment of the net present value $($NPV$)$ of acquiring the assets of Scoot$-$Ease Inc., a pay$-$by$-$the$-$hour electronic scooter rental company. Suddenly, Amiya was thrust into a pivotal role that could potentially shift her firm's standing in the competitive micromobility market. At the same time, this was also a big opportunity to establish her reputation at Forage. She wasn't sure how she could get the full analysis done in time, especially by herself.

$2.$ Background

Scoot$-$Ease Inc., a provider of pay$-$per$-$hour electronic scooter rentals, had enjoyed initial success with its unique business model and innovative technology. However, despite its initial promise, Scoot$-$Ease faced mounting competition and regulatory challenges, limiting this small player$$s ability to generate profits.

Forage sees potential in Scoot$-$Ease$$s challenges. They believed acquiring the assets of Scoot$-$Ease would provide the company with an entry point into the micromobility market, leveraging Forage$$s name recognition with consumers and scale to reach profitability. In addition, Scoot$-$Ease$$s operations are currently located in Los Angeles and Las Vegas, two of the many markets that Forage operated in$.$ Last, the GPS tracking built into the scooters would provide Forage with important information about consumer patterns that would inform some of Forage$$s other businesses and potentially lead to greater revenue generation across these businesses. Now Amiya had to figure out whether it would be worthwhile for Forage to spend the money on Scoot$-$Ease.

$3.$ Acquisition Estimates

Preliminary discussions between executives at Forage and Scoot$-$Ease suggested that the assets of Scoot$-$Ease could be purchased for $$1,350,000.$ Amiya was tasked with determining whether an acquisition at this price would create value for Forage. Fortunately for Amiya, she was not left to do the analysis completely alone. Many departments helped pull together information for large investments. In fact, they had already sent her a lot of information.

$$ In its most recent full fiscal year, Scoot$-$Ease generated $$550,000$ in revenue. Forage$$s marketing department expected this revenue to grow at $20\%,$ year$-$over$-$year for the foreseeable future.

$$ The cost accounting group provided Amiya with the following cost estimates: Fixed operating expenses of $$95,000$ in the first year that will grow at $10\%$ in future years. Variable operating expenses for cost of goods sold, SG&A$,$ and other of $12\%,25\%,$ and $7\%$ of sales, respectively.

$$ The tax group emailed Amiya the depreciation schedule that should be used for the assets $($see Table $1).$ They also provided Amiya with a projected marginal tax rate of $19\%$ to use for profits and any capital gain or loss on the sale of assets. They also reminded Amiya that individual projects could have negative taxes if the taxable income were to be negative because these tax losses would offset other taxable income from other divisions in Forage.

$$ The economics department provided an estimate that the assets purchased would be productive for Forage for about five years. At that time, all the assets would be sold at an estimated market value of $$500,000.$

Amiya also had information from the finance group. A colleague in the treasury department informed Amiya that it was company practice to hold net working capital $($NWC$)$ levels equal to $15\%$ of expected sales. Forage was a fast$-$growing information technology company, with many successful investments but also many investments that failed. Because of this, Forage typically used a relatively high discount rate of $17\%$ when considering new investments. In addition to all this great information, a colleague sent Amiya a template from a similar analysis he had done previously, which would provide a starting point for her $($See Table $2).$

$4.$ Analysis

Now that she had all the information she needed, Amiya couldn't put it off any longer. She had to sit down and do the analysis, and she had to hurry. Her boss had told her that she needed the results in $2$ days. Amiya wanted to put together a spreadsheet that would inform the board of directors and represent Amiya well.

Assignment Details

$$ Create a Microsoft Excel spreadsheet that calculates pro forma free cash flows and the net present value of the acquisition of the assets of Scoot$-$Ease by Forage. The spreadsheet will be presented by Amiya$$s supervisor to the board of directors, and Amiya will be present. The spreadsheet should includeinputs necessary to calculat