UCLA football tickets are in high demand. To help accommodate more fans in

the stadium (and earn some extra cash for athletic scholarships), the University is

considering a project to increase the capacity of the stadium by building a new VIP section. This

will require 3 annual investments of $6 million, the first of which will be made at the end of year 1

(i.e., exactly one year from now), and the second and third investments will be made at the end of

years 2 and 3, respectively.

The VIP new section, which will commence operations in year 5, will seat 1,500 people and have

infinite life. The stadium will host 8 games per year, and the ticket prices will increase by 3% each

year. For simplicity, assume that the stadium will always operate at full capacity, that there are no

taxes or additional maintenance expenditures, and that all cash inflows occur at the end of each year

(e.g., the first cash inflow from the new section will occur at the end of year 5). The annual discount

rate is 11%.

You are asked to compute the minimum price per ticket in the new section that you can charge

when the section opens in year 5 to satisfy the Universitys financial objective. The Universitys

objective is to ensure that the present value of all cash inflows from the project over its infinite life

exceeds the present value of all cash outflows by at least $1 million.