Question
The nonprofit Classic Performer, for which you serve as financial director, is considering purchasing a space for year-around performances. An old theatre in the city
The nonprofit Classic Performer, for which you serve as financial director, is considering purchasing a space for year-around performances. An old theatre in the city center is for sale for $ 80 million, and initial costing analysis has revealed that to get the theatre up and working would require another $20 million. The average operating cost for the planned activities is estimated to be $5 million per year. The ticket sales are estimated to be $10 million for the next 10 years. The theatre will need major renovation after 10 years, and the residual value at that time will be $90 million, considering the increase in real value of city property over the recent history. Do you recommend that Classic Performer purchase this property?
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