Question
A consortium of Sail group and French-based Stade de France had a service contract to operate Cape Town Stadium. Cape Town municipality paid the consortium
A consortium of Sail group and French-based Stade de France had a service contract to operate Cape Town Stadium. Cape Town municipality paid the consortium to operate the stadium during the World Cup. After the consortium leased the stadium from the city. The lease contract has to be at least 10 years and no more than 30 years. If the revenue for each match-day is R200,000 and the variable cost associated with each match is R40,000. Moreover, fixed administration overheads is R400,000 per year and the average number of match-day per year is 100 matches. The consortium decided to lease the stadium for 20 years with leasing cost of R300,000,000. Evaluate the consortium decision.
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