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 investment). The city engineer has collected the following financial information for the complex project:
1) Annual upkeep costs: $120,000
2) Annual Utility costs: $13,000
3) Renovation costs: $50,000 for every 5 years
4) Annual team user fees (revenues): $32,000
5) Useful life: Infinite
6) Interest Rate: 8%

If the city can expect 40,000 visitors to the complex each year, what should be the minimum ticket price per person so that the city can break even?

Explanation / Answer

Fixed cost 1) Annual upkeep costs: $120,000 2) Annual Utility costs: $13,000 3) Renovation costs: $10,000 Interest on capital investment $64,000 Total Cost $207,000 Less: Team user fees $ 32,000 Fixed cost $175,000 Number of visitors 40,000 Minimum Ticket price $4.375

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