Cost and Profit

1. You are trying to start a construction business in the City of New Orleans. You are considering building a stadium for the City for an upcoming game but do not have the money to finance the project. As a result, you cashed out $80,000,000 of your savings that was yielding 7.5% interest annually. You hired three engineers at a salary of $220,000.00 each and bought materials and equipment for $1,200,000. After the construction of the stadium, you sold 160,000 tickets at a price of $30.00 each for the first year.

A. Based on the information above, during the first year of operation, what would be your profit regarding the project? (25points)

(PLEASE SHOW ALL YOUR CALCULATIONS AND IN STEPS).

B. If you were to be the financial advisor to this building contractor, what would you advise him to do. (Explain clearly) (5points)

C. Based on your calculation and decision in part “a” above; suppose you decide to sell additional 200,000 tickets at the same price would this change your decision?

(You must show your calculations first. This is not just a yes or no answer it comes with explanations) (10points)

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