The Florida Boosters Association has decided to build new bleachers for the football field. Total costs are estimated to be $1million, and financing will be through a bond issue of the same amount. The bond will have a maturity of 20 years, a coupon rate of 8% and has annual payments In addition, the Association must set up a reserve to pay off the loan by making 20 equal annual payments into an account that pays 8% annual compounding. The interest-accumulated amount in the reserve will be used to retire issue at its maturity 20 years hence. The Association plans to meet the payment requirements by selling season tickets at a $10 net profit per ticket. How many tickets must be sold each year to service the debt ( to meet the interest and principal repayment requirements) ?
Cost of the project - $ 1 million.
Interest on borrowings - 8% means annual interest cost is $ 80,000
principal Repayment yearly into reserve account = $1000000/20 = $50,000
Minimum earnings should be = $ 80,000 + $ 50,000 = $ 130,000
Net profit per ticket = $10
Number of ...
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