EXHIBIT A4-1 GSC Computer Equipment Financing Options Analysis had indicated that GSC should obtain a model XTZ computer and related software for its operations. This equipment has an expected useful life of five years with no estimated salvage value. The two financing options identified by the board of trustees are described below. The appropriate discount rate to evaluate these options was stipulated to be 11%. Option One The XTZ computer and related software could be purchased for $40,500. Since GSC has only $20,000 available for this acquisition, the balance would be financed by a five-year bank loan at an annual interest rate of 11%. Equal annual payments would be due at the end of each year. Option Two The XTZ computer and related software could be leased from Acme Computers Ltd. The lease agreement would be for a five-year period requiring equal payments of $10,000 at the beginning of each year. EXHIBIT A4-2 GSC Expected Admission Levels and Operating Cost Data At the request of the municipality, GSC has agreed to admit senior citizens and preschool chil- dren free of charge during the first year of operations. To compensate GSC, the municipality reluctantly granted a one-time subsidy of $1,000,000 for GSC's first year of operations. GSC must find an adult admission price for the first year which would be sufficient to cover operat- ing costs in excess of the subsidy. GSC would be paid full adult admission up to $6 per person by the board of education and the university for students who attend the science centre. A market study confirmed that demand for admissions to GSC would be relatively inelastic at prices at or below $6.50 per admission. The study also produced the following probability dis- tribution for total admissions (adults, students, senior citizens, and preschool children) for the first year of operations assuming an admission price of zero up to $6.50: Total Number of Admissions Probability 950,000 to 1,050,000 0.10 1,050,001 to 1,150,000 0.25 1,150,001 to 1,250,000 0.40 1,250,001 to 1,350,000 0.15 1,350,001 to 1,450,000 0.10 It was estimated that 20% of the admissions would be senior citizens and preschool children, 60% students, and 20% other adults. Initial cost analysis at various total admission volume levels resulted in the following expected total operating costs for the first year of operations (excluding the XTZ computer and related software costs by including all science fair costs): Total Number of Admissions Total Operating Costs 500,000 1,000,000 1,500,000 $6,080,000 6,390,000 6,700,000 (This analysis assumes linear cost behaviour within the relevant range.) EXHIBIT A4-3 GSC Admission Pricing Policy for Second and Subsequent Years Three admission pricing policy options were identified as follows: 1. Admit senior citizens and preschool children free of charge and promote GSC more vigor- ously. It was estimated, for example, that a $200,000 increase in annual promotion and ad- vertising expenditures would generate a 10% increase in total number of admissions. 2. Charge a discounted admission price for senior citizens and preschool children. 3. Admit senior citizens and preschool children free of charge and convince the municipality to continue the subsidy.