Library can withstand to keep honoring financing payments

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Reference no: EM131613935

The payments for the library ($ 56,630,000 per year, for 22 year) will be funded with advertisements on the screens around the library and with an entrance fee each visitor has to pay. The advertisers agree to pay $3 per each visitor that comes in the library, while the entrance fee is $2.

What is the maximum yearly percentage loss in visitors that the library can withstand to keep honoring the financing payments in each respective year (from 2018 til 2040), if yearly payment is $56,630,000 there are 13,500,000 visitors in the first year? How does your answer changes if the amount advertisers pay grows with inflation and inflation is expected to be 3% a year forever, while, for political reasons, the entrance fee cannot be modified?

Reference no: EM131613935

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