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# Number of tickets to be sold to service the debt

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) ?

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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 ...

#### Solution Summary

The solution answers the question below.

\$2.19