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  3. part b is drop down to select higher or lower. bo

Part b is drop down to select HIGHER OR LOWER. Bold's Gym, a health...

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Accounting

imagePart b is drop down to select HIGHER OR LOWER.

Bold's Gym, a health club chain, is considering expanding into a new location: the initial investment would be $1.00 million in equipment, renovation, and a 6-year lease, and its annual upkeep and expenses would be $70,000 (paid at the beginning of the year). Its planning horizon is 6 years out, and at the end, it can sell the equipment for $50,000. Club capacity is 500 members who would pay an annual fee of $600. Bold's expects to have no problems filling membership slots. Assume that the interest rate is 14%. a) The present value of profit for Bold's Gym based on the deal = dollars (round your response to the nearest whole number and include a minus sign if necessary). b) The club is considering offering a special deal to the members in the first year. For $3,000 upfront they get a full 6-year membership (i.e., 1 year free). Based on the comparison of present value of revenue from membership fees, financially the present value of revenue from this option is than the present value of revenue based on the per year fee

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