City Racquetball Club (CRC) offers racquetball and otherphysical fitness facilities to its members. There are four of theseclubs in the metropolitan area. Each club has between 1,800 and2,500 members. Revenue is derived from annual membership fees andhourly court fees. The annual membership fees are as follows:Individual $ 40 Student $25 Family $95 The hourly court fees varyfrom $6 to $10 depending upon the season and the time of day (primeversus nonprime time). The peak racquetball season is considered torun from September through April. During this period, court usageaverages 90 to 100 percent of capacity during prime time (5:00–9:00p.m.) and 50 to 60 percent of capacity during the remaining hours.Daily court usage during the off-season (i.e., summer) averagesonly 20 to 40 percent of capacity. Most of CRC’s memberships haveSeptember expirations. A substantial amount of the cash receiptsare collected during the early part of the racquetball season dueto the renewal of the annual membership fees and heavy court usage.However, cash receipts are not as large in the spring and dropsignificantly in the summer months. CRC is considering changing itsmembership and fee structure in an attempt to change its cashreceipts. Under the new membership plan, only an annual membershipfee would be charged, rather than a membership fee plus hourlycourt fees. There would be two classes of membership as follows:Individual $250 Family $400 The annual fee would be collected inadvance at the time the membership application is completed.Members would be allowed to use the racquetball courts as often asthey wish during the year under the new plan. All futurememberships would be sold under these new terms. Currentmemberships would be honored on the old basis until they expire.However, a special promotional campaign would be instituted toattract new members and to encourage current members to convert tothe new membership plan immediately. The annual fees for individualand family memberships would be reduced to $200 and $300,respectively, during the two-month promotional campaign. Inaddition, all memberships sold or renewed during this period wouldbe for 15 months rather than the normal one-year period. Currentmembers also would be given a credit toward the annual fee for theunexpired portion of their membership fee, and for all prepaidhourly court fees for league play that have not yet been used.CRC’s management estimates that 60 to 70 percent of the presentmembership would continue with the club. The most active members(45 percent of the present membership) would convert immediately tothe new plan, while the remaining members who continue would waituntil their current memberships expire. Those members who would notcontinue are not considered active (i.e., they play five or fewertimes during the year). Management estimates that the loss ofmembers would be offset fully by new members within six months ofinstituting the new plan. Furthermore, many of the new memberswould be individuals who would play during the nonprime time.Management estimates that adequate court time will be available forall members under the new plan. If the new membership plan isadopted, it would be instituted on February 1, well before thesummer season. The special promotional campaign would be conductedduring March and April. Once the plan is implemented, annualrenewal of memberships and payment of fees would take place as eachindividual or family membership expires. ? ? ?? Your consultingfirm has been hired to help CRC evaluate its new fee structure.Write a letter to the club’s president answering the followingquestions. 1. Will City Racquetball Club’s new membership plan andfee structure improve its ability to plan its cash receipts?Explain your answer. 2. City Racquetball Club should evaluate thenew membership plan and fee structure completely before it decidesto adopt or reject it. a) Identify the key factors that CRC shouldconsider in its evaluation. b) Explain what type of financialanalyses CRC should prepare in order to make a complete evaluation.3 Explain how City Racquetball Club’s cash management would differfrom the present if the new membership plan and fee structure wereadopted. EXCEL SHEET