Reference no: EM132954774

Newspaper reports about Lewis's boxing match - Tyson said the two boxers would receive a cash payment of $2,500,000 each. The fight will be broadcast on close-circuit television. The central promoter will collect 100% of the ticket sales and will return 30% to the local promoter. He hopes to sell 1,100,000 TV seats, at a net average price of $10 per seat. Promoter center will also receive $250,000 from Madison Square Garden (which has sold a total of 19,500 seats) ranging from $150 near the ring to the cheapest
$20, with a total gross income of $1,250,000. $250,000 of proceeds from Madison Square will not be shared with the Local Promoter.

Requested:

Problem a. The central promoter tries to be able to ascertain, how much amount will be used for advertising promotions. What is the maximum that can be issued and still pay off for the entire project, assuming that 1.1 million tickets will be sold.

Problem b. If the central promoter wants an operating profit of $500,000, how many seats must be sold? It is assumed that the average ticket price is $10 and the fixed costs are $8 million.