City Racquetball Club (CRC) offers racquetball and other plysical finess facilitics to its members. There are four of these elubs in the metropolitan area. Each club has between 1,800 and 2,500 members. Revenue is derived from annual membership fees and hourly court fees. The annual membership fees are as follows: The hourly court fees vary from $6 to $10 depending upon the season and the time of dyy (prime versus nonprime time). The peak racquetball season is considered to rum from Scptember through April. During this period. coart uage averages 90 to 100 percent of capaeity durins prime time ( 5:009.00 p.m.) and 50 to 60 percent of capacity during the remaining hours. Dally court usage during the offseason (i.c. summer) averages enly 20 to 40 percent of capacity. Most of CRC's menberships have September expirations. A substantial amount of the eash receipts are collected during the early part of the racquetball season due to the renewal of the annual niembership fees and heivy court usage. However. caah receipts are not as large in the spring and drop significantly in the summer months. CRC is considering changing its membership and fee structure in as afteapt to change its cash receipts. Uader the new memberihip plan, only an annual membership fee would be charged, father than a membership fee plas hourly court fees. There woold be two clasies of membership as folloss: motvicual 1250 Familly 400 The annual fee would be colleeted in advance at the time the membership application is completed. Members would be aliowed to tise the racquetball courts as often as they wheh during the yeor under the new glan. All future memberships would be sold under these new terns. Curent inenberships woold ve honorcd oa the old basis until they expire. However, a special promotional campaign would be institited to attract new menbeis and to encourafe current menbers to convert to the racquetball courts as often as they with during the year under the new plan. All future memberships would be sold under these new terms. Current memberships would be honored on the old basis until they expire. However, a special promotional campaign would be inttituted to attract new nembers and to eneourage current members to convert to the new membership plan immediately. The annual fees for individual and family memberships would be reduced to $200 and $300, respectively, during the two-month promotional campaign. In addition, all memberships sold or renewed during this period would be for 15 months rather than the normal one year period. Current members also would be given a credit toward the annual fee for the unexpired portion of their membership fee, and for all prepaid hourly court fees for league play that have not yet been used. CRC's management estimates that 60 to 70 peroent of the present membership would continue with the club. The most active members (45 percent of the present membership) would convert immediately to the ncw plan, whlle the remaining members who continue would wait until their current memberships expire. Those members who would not continue are not considered active (i.e., they play ftve or less times during the year). Management estimates that the loss of members would be offist fully by new members within six months of instituting the new plan. Furthermore, mary of the new members would be individuals who would play during nonprime time. Management cstimates that afequate court time will be available for all members under the new plan. If the new membership plan is adopted, it would be instituted on February I. well before the summer season. The speeial promotional campaign would be conducted during March and April. Once the plan is implemented, annual renewal of memberships and payment of fees would take place as eoch individual or fanily membership expires Required: Your consulting frms has been hired to help CRC evaluate its new fee structure. Write a letter to the club's president answering the following questions. 1. Will City Racquetball Club's new membership plan and fec structure improve its ability to plan its cash receipts? Explain your answer. 2. City Racquetball Club should cvaluate the new membersnip plan and fec structure completely before it decides to adopt or reject it. a Identify the key factors that CRC should consider in its cvaluation. b. Explain what type of financial analyses CRC should prepare in order to make a complete evaluation. 3. Explain how Ciry Racquetball Club's cash management would differ from the preient if the new membership plan and fee strueture were adopted. icua sunpteth