Reference no: EM132655780

Mr. Burton will rent a theater for 6 consecutive years. In order for Mr. burton to do this he will pay $6,000,000 today. His plan is to sell tickets for an opera that he wrote himself. He wonders what should be the minimum selling price per ticket if he wants to make a profit. The theater has a capacity of 2200 persons and he can make opera functions 4 days per week. He will hire many actors, musicians, and people in charge of the lights, security, etc. All salaries combined add up to $1'012,000 paid every 6 months. The actors need vacations, so the theater will make functions only 48 weeks per year. He believes that he can sell 75% of the theater capacity every time that there is a function, and there will be 2 functions every working day. MARR = 9%

Problem a) What should be the minimum price per ticket? Why? Explain in your words.

Problem b) The project will be most sensitive for which following factor: Initial investment, ticket selling rate or salaries of employees? Why? Explain with your words.