Preliminary plans are underway for construction of a new stadium for a ML baseball team. City officials question the number and profitability of the luxuary corporate boxes planned for the upper deck of the stadium. Corporations and select individuals may purchase a box for $300,000. The fixed construction cose for the upper deck area is estimated to be $4,500,000 with a VC of $150,000 for each box constructed.
a. What is the breakeven point for the number of luxury boxes in the new stadium?
b. Preliinary drawings for the stadium show that space is available for the construction of up to 50 luxury boxes. Promotors indicate that buyers are available and that all 50 could be sold if constructed. What is your recommendation concerning the construction of the luxury boxes? What profit is anticipated?