Economic feasibility and cost modeling for horse training centers: a financial perspective from Brazil

Abstract

This study aimed to develop a cost calculation model for equine training centers and assess their feasibility. It established critical parameters for such centers, including facilities, equipment, labor, and operational metrics. A Microsoft Excel-based model allocated costs into variable, fixed operating, and opportunity costs. Input prices and quantities were collected to calculate economic indicators like gross margin, net margin, profit, break-even point, total factor productivity, and rate of return. A five-year cash flow projection was developed, estimating financial indicators like net present value (NPV), rate of return, internal rate of return (IRR), and discounted payback. The project obtained an annual profit of $5,298,64, with gross and net margins of $51,630.35 and $23,852.72, respectively. In this scenario, the break-even point, which represents the minimum number of horses needed for costs to equal profits, was calculated to be nine horses. The rate of return for the project was 15%. Risk indicators demonstrated a high level of security (531.49% IRR and payback within the first year), and profitability indicators were positive, with an NPV of $87,005.78, a benefit-cost index (IBC) of 2.75, and a profitability rate of 1,261%. The project was found to be financially viable, and the cost model aligned with economic theory principles. This model offers a valuable tool for equine training center operators, investors, and stakeholders, enabling informed decision-making by providing a detailed economic and financial analysis of costs and profitability. It assists in optimizing resource management, improving pricing strategies, identifying areas of inefficiency to enhance profitability, and supporting long-term planning and sustainability in equine businesses.