You are a financial analyst for an animal advocacy organization. Your organization has been invited by the city government to establish and run a rescue and adoption facility for cats and dogs, which will be called the Animal Rescue Center. The executive director has asked you to analyze the proposal. The City will give you a long-term lease for free space in a City building. You can house 75 pets in this space, and you believe that you will always be operating at full capacity.

Your organization will have to spend $120,000 of its own money to convert the space for these purposes, but you have the funds in hand from a previous gift that contemplated a project like this one. You will also have utility costs of $250 a month. The facility will be staffed by: a facilities administrator whose salary and benefits will total $50,000 a year; a maintenance worker with salary and benefits of $35,000 a year; and a part-time veterinarian whose compensation will total $25,000 a year. Food and medicine will cost $5 per day per animal. Other supplies are expected to cost $175 a month.

The facilitys revenues will come from several streams of reimbursement. The City will contribute contract fees of $12,500 a month, paid one month after it is earned. The City will also reimburse the facility for boarding expenses at a rate of $25 per animal per week, paid timely.

Finally, the facility will receive an incentive bonus of $100 for each successful adoption, paid quarterly based on the prior quarters adoptions. You expect that 160 animals will be adopted each year, with activity spread out evenly throughout the year.

The executive director asks you several questions:

a. Is the facility likely to pay its own way?

b. Prepare an annual operating budget for the facilitys first year, and calculate the planned profit or loss.