Marketing Chapter 8 Homework The Best Option Combination Revenue Bond 27

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The Best Option: A Combination

Revenue Bond at 2.7 million and Addditional Sources of Funding

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20

Change in Revenues 860,000 860,000 860,000 860,000 860,000 810,000 810,000 810,000 810,000 810,000 810,000 810,000 810,000 810,000 810,000 810,000 810,000 810,000 810,000 810,000

Change in Operating Costs 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550 476,550

Change in Depreciation 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000 135,000

NPV $3,473,442.10

Cost of Revenue Bond 2,700,00.00

Profit after 20 years $773,442.10

Summary of Revenue: Daily Admission $720,000

Special Groups $7,500

Pepsi Rights $20,000

Concessions $40,000

Higher Attendence Sample Analysis

Attendance at 150,000 (100,000 children: 50,000 adults)

Revenue Bond at 8% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20

Change in Revenues 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000

Change in Operating Costs 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885 588,885

General Obligation Bond at 7.5%

Change in Revenues 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000

Change in Operating Costs 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000 212,000

Change in Depreciation 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000 185,000

BREAK EVEN ANALYSIS

Revenue Bond at 8% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20

Change in Revenues 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$

Change in Operating Costs 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$ 588,855$

Change in Depreciation 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$ 185,000$

NPV 1,816,330$ 3,700,000$ (1,883,670)$

General Obligation Bond

at 7.5%

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20

Change in Revenues 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00 212,004.00

Change in Operating Costs 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$ 212,000$