Discussion Questions1. Develop a forecasting model, justifying its selection over othertechniques, and project attendance through 2007.2. What revenues are to be expected in 2006 and 20073. Discuss the school’s options.Case Study (Southwestern University)Southwestern University (SWU), a large state college in Stephenville, Texas, enrolls close to 20,000 students. The school is a dominant force in the small city, with more students during fall and spring than permanent residents. Always a football powerhouse, SWU is usually in the top 20 in College football rankings. Since the legendary Bo Pitterno was hired as its head coach in 1999 (in hopes of reaching the elusive number 1 ranking),attendance at the five Saturday home games each year increased. Prior to Pitterno’s arrival, attendance generally averaged 25,000 to 29,000 per game. Season ticket sales bumped up by 10,000Just with the announcement of the new coach’s arrival. Stephenville and SWU were ready to move to the big time!The immediate issue facing SWU, however, was not NCAA ranking. It was capacity. The existing SWU stadium, built in 1953, has seating for 54,000 fans. The following table indicates attendance at each game for the past 6 years.One of Pitterno’s demands upon joining SWU had been a stadium expansion,or possibly even a new stadium. With attendance increasing, SWU administrators began to face the issue head-on.Pitterno had wanted dormitories solely for his athletes in the stadiumas an additional feature of any expansion.SWU’s president, Dr. Joel Wisner, decided it was time for hisvice president of development to forecast when the existing stadiumwould “max out.” The expansion was, in his mind, a given. But Wisner needed to know how long he could wait. He also sought arevenue projection, assuming an average ticket price of $20 in 2006and a 5% increase each year in future prices.Southwestern University Football Game Attendance, 2000-20052000GAMEATTENDEESOPPONENT 1 34,200 Baylor Texas3 38,200 LSU4b26,900 Arkansas5 35,100 USC2001 GAMEATTENDEES OPPONENT 136,100Oklahoma2a40,200 Nebraska339,100 UCLANevada536,200 Ohio State2002GAMEATTENDEES OPPONENT135,900 TCU2a46,500 Texas Tech343,100 Alaska4b27,900 Arizona539,200 Rice2003 GAMEATTENDEES OPPONENT 141,900 Arkansas 2a46,100 Missouri343,900 Florida4b30,100 Miami540,500 Duke2004 GAMEATTENDEES OPPONENTIndiana 2a48,200 North Texas344,200 Texas A&M4b33,900 Southern547,800 Oklahoma2005GAMEATTENDEES OPPONENT146,900 LSU2a50,100 Texas345,900 Prairie View A&M4b36,300 Montana549,900 Arizona State(a) Refer to Homecoming games.(b) During the 4th week of each season, Stephenville hosted a hugely popular southwestern crafts festival. This event brought tens of thousands of tourists to the town, especially on weekends, and had an obvious negative impact ongame attendance.

Andiola Corporation is evaluating whether to lease or purchase equipment. Its tax rate is 30 percent. If the company purchases the equipment for $1,000,000 it will depreciate it over 5 years, using straight-line depreciation. If the company enters into a 5-year lease, the lease payment is $200,000 per year, payable at the beginning of each year. If the company purchases the equipment it will borrow from its bank at an interest rate of 11 percent. a. Calculate the cost of purchasing the equipment.b. Calculate the cost of leasing the equipment.c. Calculate the net advantage to leasing. Should the company purchase or lease the equipment?