Hi,

Could you please help me with this question?

Thank you.

1.Some friends of yours are considering getting into the self-storage industry as owners of a self-storage facility. They have done some preliminary research and know that the main costs in this industry tend to be the loan payments/rent on the facility, the utilities, and a salary for an on-site manager. Using some simple estimations and calculations, they believe they will break-even at about 60% occupancy. The facility they are considering is currently operating near that break-even occupancy. Explain why this business would have a high degree of operating leverage and how this might affect your friends' decision to enter the industry. (Hint: What does a high DOL mean for the owners' profits in good times (if the occupancy goes up) and bad times (if occupancy goes down), and what are the implications?)