Investment Analysis for

Sport Horse Rehabilitation

Presented to Ashley Murray, Horse Owner
Presented by Jordan Parker
April 20th, 2020
Opportunity / Problem

• Ashley Murray of Olive Hill Sport Horses recently had

her winning show jumper, Semper Fidelis, come up lame
with a strain on her Superficial Digital Flexor Tendon
(SFDT).
 She wants to know: Should she rehab Semper Fidelis? Should she retire Semper
Fidelis?
Objectives
We want to know:
• Should Ashley rehab Semper Fidelis?
 What are the associated costs?
 Will Semper Fidelis be able to return to winning classes?

• Should Ashley retire or sell Semper Fidelis?

 If she becomes retired, what is the cost of rehab and
maintaining a horse not bringing in income?
 How much can she sell Semper Fidelis for, with rehab and
without rehab?
Scenario
• Ashley Murray bought Semper Fidelis
as a 4 year old mare, and trained her up
to the CS1 3* show jumping level.
 She loves Semper Fidelis, and they have
competed together for 6 years.
 Ashley believes Semper Fidelis can
compete at the 3* level for at least 5 more
years.

• Recently, Semper Fidelis was diagnosed

by a veterinarian with a soft tissue
strain in Superficial Digital Flexor
Tendon.
 This is one of the most common injuries in
performance horses
 The injury is characterized by minute
muscle fiber tears, inflammation, and
lameness
 Complete recovery time is ~ 1 year, with
rechecks every 2 months
 The prognosis for this injury is good;
according to the American Association of
Equine Practitioners, ~ 45% of horses are
able to recover and return to normal work.
Procedure
• How will this affect the farm across 1 year?
 Answer using linked input from Enterprise Budget and an Investment
Analysis on a per month basis

 Should Semper Fidelis be Rehabilitated or Sold?

 Answer using an Investment Analysis on a per month
 Comparison of Veterinary Costs and Show Winnings in a Two Way Table
 Look at Break Even Price for Winnings post rehab, sale price w/o rehab,
and sale price w/ rehab
 Consideration of the emotional value of the horse
 Results: How Will this Affect the
Farm Across 1 Year?
Enterprise Rehabilitation Costs Resale Value

Horse Semper Fidelis Rehabilitation Cost $ 10,035 per month Horse Semper Fidelis
Gross Return/Horse $ 56,250.00 Recovery Time 12 months Horse Value w/o Injury $ 250,000.00
Variable Cost/Horse $ 32,330.00 Principal Borrowed $ 100,000.00 % Decrease in value after injury 50% Since prognosis is 50% full recovery
ROVC/Horse $ 23,920.00 Interest Rate 10% Horse Value w/o Rehabilitation $ 125,000.00
# of Classes Entered 4 Classes/Year Repayment Term 12 months % Increase in Value w/ Rehab 5.0% per month
Percent Classes Won 25% Recovery Time 12 months
Show Entry Fees $ 2,000.00 Price/Class Insurance Covered Costs $ 50,000 per year -
Prize Money 75000.0 Prize/Class Decrease in Costs/Visit 5% Diagnostics, etc
Percent Prize Earned 75%

• Because the horse is not making money while it is in rehab, Ashley must
take out a loan to cover veterinary costs.

• The horse’s value falls by 50%, since the prognosis is a 50% full recovery
with return to normal work and 50% incomplete recovery, with varying
ability to return to any work.

• With each month of rehab, the horse’s sale value increases by 5%

 Results: How Will This Affect The
Farm Across 1 Year?
• With each month of rehab, the owner sees good improvement in net cash
flow. The enterprise budget shows the total gross return of the horse that
month, the costs associated with rehab, and how much money Ashley would
make if she were to sell Semper Fidelis at the end of that month.

• It is important to note that after 12 months, Semper Fidelis does not return
to her $250,000 sale value before injury. This is due to the increased risk of
re-injury, and the potential but unknown decrease to the length of the
horse’s career.
Investment Analysis of Horse After Injury
Enterprise Totals 1 2 3 4 5 6 7 8 9 10 11 12
Total Gross Return $ 125,000 $ 131,250 $ 137,813 $ 144,703 $ 151,938 $ 159,535 $ 167,512 $ 175,888 $ 184,682 $ 193,916 $ 203,612 $ 213,792 If horse is sold
Total Variable Cost $ 28,318.33 $ 26,902 $ 25,557 $ 24,279 $ 23,065 $ 21,912 $ 20,817 $ 19,776 $ 18,787 $ 17,848 $ 16,955 $ 16,107 $ 260,324.73
ROVC $ 96,681.67 $ 104,347.58 $ 112,255.20 $ 120,423.69 $ 128,872.82 $ 137,623.01 $ 146,695.38 $ 156,111.80 $ 165,894.97 $ 176,068.41 $ 186,656.60 $ 197,684.95 sale price of horse w/ that many months
Rehab Interest (IPMT) $ (10,000) $ (9,532) $ (9,018) $ (8,452) $ (7,830) $ (7,145) $ (6,392) $ (5,563) $ (4,652) $ (3,650) $ (2,547) $ (1,334)
Rehab Principal (PPMT) $ (4,676) $ (5,144) $ (5,658) $ (6,224) $ (6,847) $ (7,531) $ (8,284) $ (9,113) $ (10,024) $ (11,027) $ (12,129) $ (13,342)
Net Cash Flow $ 82,005 $ 89,671 $ 97,579 $ 105,747 $ 114,196 $ 122,947 $ 132,019 $ 141,435 $ 151,219 $ 161,392 $ 171,980 $ 183,009 Of Rehabbing if horse is not sold
Results: Retire or Sell?
Risk Analysis: Break Even • The cost to rehab is $7,000 higher than
what would be made after rehabilitation
Considerations and then profits from sale of the horse.
• Semper Fidelis would have to win every
Sale Value after Rehab $ 213,792
show class she was entered the
following year to break even on the price
Cost of Investment $ 220,420
of her recovery.
Value-Cost $ (6,628)
 This seems unlikely, given reduce
performance that often comes after injury
B-E Show Winnings $ 220,420.00
B-E Sale Price w/ Rehab $ 260,324.73 • Semper Fidelis would have to sell for
B-E Sale Price w/o Rehab $ 127,000.00 more than her healthy, uninjured
market value to break even after
rehabilitation.
• Semper Fidelis would have to sell for
more than her appraised value post
injury to break even after injury and
without rehab.
Results: Retire or Sell?
• Risk Analysis: Two Way Table

• The two way table shows that if Semper Fidelis can recover in 3 months, and
the average veterinary cost per month is only $5,000, than her sale value
after rehab will make Ashley $98,792.
 This makes sense; the longer it takes for Semper Fidelis to recover, and the more
expensive the veterinary costs, the more money Ashley will lose after fully
rehabilitating her and then selling her.
Recommendations
• Soft tissue injuries can take anywhere from 3 months to a whole year to
recover from, and the prognosis for recovery is variable. Additionally, many
horse owners are emotionally attached to their horses, making it even more
difficult to make this recommendation entirely on the numerical figures.
 But that is economics!
 Ashley should consider: how much emotional value the horse brings to her life; could
she still enjoy riding Semper Fidelis at a less competitive level; her personal ethics
on what she thinks is best for her horse.

• As her economic advisor, I advise Ashley to either

 a) sell Semper Fidelis immediately after injury for the price of $127,000. This is the
most financially sound decision.
 B) If the emotional value of Semper Fidelis is high enough for Ashley, than keep and
rehab Semper Fidelis, but put her into a breeding program. With some investment
and time, a high quality show horse like Semper Fidelis will have very valuable
offspring. She can reduce rehab prices by getting rid of some of the fancier
treatments, like the oxygen chamber, though this will increase recovery time.
Resources
• https://aaep.org/sites/default/files/issues/proceedings-08proceedings-
z9100108000475.pdf

• https://work.chron.com/average-salary-professional-show-jumpers-
30512.html

• https://www.usef.org/forms-pubs/Qbn3Og5AY8Y/gr9-competition-prize-lists-
entries

• Issacs, S. “Lab 6: Investment Analysis” (2020, February). [AEC 302 Lab

Exercise]. Department of Agricultural Economics, University of Kentucky.