Reference no: EM132935583

Problem 1: Based on Glory's 8 percent cost of capital, which system should management choose?

Glory Mountain has never offered any type of day care for younger children of skiing families. Given the changing demographics of its patrons, Dan Finn thinks that the Mountain needs to offer those services. Erika Fossett, Glory's director of operations, has worked up a proposal for what she is calling the Glory Kids' Center. She wants it to provide combined day care and ski lessons for children between the ages of 3 and 7. The center would be run by a director who will earn $60,000 per year plus benefits. For every 10 children using the Kids' Center, the center will employ one full-time instructor. That instructor will provide both day care and skiing instruction. Each instructor will earn $25 per hour including benefits. The center will provide 8 hours of care per day. Instructors will only be paid for the hours the children are at the center. The children are fed lunch and a snack at a cost of $10 per child per day. Supplies for activities the children will be engaged in when they are not skiing will cost an average of $10 per child. Glory plans to charge $70 per day per child.