CHC expects total expenses of $142,000 in the first year. It will set the membership fee at $500 and expects to attract 300 members in its first year. It could rent another unit for an extra $12,000 per year. The extra unit may attract additional members because of the added space.
Determine CHC's earnings before taxes in the first year if this extra unit is rented and results in:
a) A total of 314 memberships in the first year.
b) A total of 320 memberships in the first year.
c) If the unit will result in 320 memberships in the first year, would you recommend that CHC rent the unit?