Momshie Dina is currently earning P200,000 annually working at a sports gym in the side of their town. She has a loyal following of students, and considering to put up her own gym facility. Her idea is to open a small gym with a workout area equipped with free-weights and an exercise mat. She will also hold weekly karate classes. Momshie Dina is the sole family wage earner. She, her husband, and three young children live in a middle class subdivision in the west side of their town with a population of approximately 150,000. Momshie Dina has found an appropriate building to rent in the area near her home, and she estimates the following revenues and costs of opening her new facility:

a. Rent (includes utilities) for a room about the size of a college classroom (30' x 50') on the west side of town in a strip mall. There are no shower facilities, but there will be changing rooms with lockers. .......................................................................P6,000 per month

b. Initial costs include new carpet, an exercise mat, and exercise equipment. Useful life of these items is 5 years. ............................................................P100,000

c. Members will pay an annual fee for the use of the facility. Momshie Dina estimates that she can attract and accommodate 200 members annually. ................ P500 per year

d. For a basic 4-week karate class for all levels except black belt. Momshie Dina anticipates 15 students per month. .........................................................P400 per class

e. For a black belt class and testing, Momshie Dina anticipates two students per year and earn..............................................................................P10,000 per student

Instructions:

Momshie Dina has come to you for advice.

a. Based on the above information, would you recommend Momshie Dina start this company? Why or why not? Provide commentary as well as computations to support your response.

b. What are some of the questions you would ask Momshie Dina to help her think through this decision? List at least five relevant questions.