Cavendish Cove Cottages
Sherry Noonan, a senior business student, is considering purchasing Cavendish Cove Cottages, a complex of 19 cottage rental units marketed to visitors. The property is located in the heart of Cavendish, a very popular tourist destination on Prince Edward Island (PEI), Canada. Sherry must analyze this opportunity as a going concern. This case presents a unique situation: the opportunity to apply business valuation concepts in a small business environment, and from the perspective of a college-age entrepreneur. This case provides the opportunity to utilize the planning, analytical, and decision-making techniques of a prospective entrepreneur who is considering acquiring an existing business. This is complicated by the fact that the business is seasonal and only open a portion of the year. Also affecting the analysis is the deteriorating economic environment that existed at the time of the case (early 2009), leading to the possibility of declining tourist numbers and spending on PEI. While her family may provide some of the financing to purchase the business, the task of raising the additional funds required could prove difficult given Sherry's young age and the very tight credit markets. A thorough analysis of the business's financial situation must be completed, strengths and weaknesses uncovered, and areas for improvement discussed. Yearly sales, expenses, and cash operating earnings must then be forecast, and the value of the business estimated. A recommendation, based on the various tools used to analyze the case information, must then be made. The Instructor's Manual suggests the types of courses the case is suited for, offers a range of discussion questions and teaching formats, and provides a thorough financial analysis of the business opportunity.