Answer to Question #121257 in Economics of Enterprise for Imran

Question

A University is proposing the development of a modern squash court, next to its current residence hall. For the first five years the University has offered to open the court to local players at student rates to secure local support for its planning application. The University will owe the courts anything it wants after five years. Accordingly, the University predicts that total court income for each of the first five years would be $1200, rising by 12% (compounded) in each of the sixth to tenth years. In the eleventh and twelfth years, increasing operating expenses would entirely outweigh increasing revenues, ensuring that net income stays at the pace of ten years. The site’s set for renovation the end of the twelfth year.It is projected the expense of construction the squash is $6500.

Answer 1

Since profit can be obtained by subtracting total costs from the total income, we will initially determine the total income for the indicated 12 years, and then subtract the total amount of expenses indicated in the condition.