A city has decided to build a softball complex and the city council has already

Question

A city has decided to build a softball complex and the city council has already voted to fund the project at the level of $ 800,000 (initial capital equipment). The city engineer has collected the following financial information for the complex project. Annual upkeep costs: $ 120,000 Annual utility costs: $ 13,000 Renovation costs: $ 50,000 for every five years Annual team user fees (revenues): $ 32,000 Useful life: Infinite Interest rate: 8 % , compounded annually. If the city can expect 35,000 visitors to the complex each year, what should be the minimum ticket price per person so that the city can break even?

Explanation / Answer

Annual 5 year annual Expected visitor 35000 175000 Annual Upkeep cost 120000 600000 Annual Interest 64408.28 322041.4 Annual utility Cost 13000 65000 Renovation Cost 10000 50000 Total Cost 207408.3 1037041 Less annual Team user fees 32000 160000 Total to Earn from Ticket 175408.3 877041.4 Ticket price 5.011665 5.011665 Minimum price = $5.01 to break even.

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