Please help with this!!

to be ready by then. However, other factors had to be considered. The area was growing both in terms of population and geographically. The downtown area just received a major facelift, and many new ofces and businesses were moving back to it, causing a resurgence in activity. With this growth came increased competition. A new YMCA was offering a full range of services at a low cost. Two new health and tness facilities had opened within the past year in locations 10 to 15 minutes from Fitness Plus. The rst, called the Oasis, catered to the young adult crowd and restricted the access of children under 16 years old. The other facility, Gold's Gym, provided excellent weight and cardiovascular training only. As the owners thought about the situation, they had many questions: Were the capacities of the existing facilities consh'ained, and if so, where? If capacity expansion was necessary, should the existing facility be expanded? Because of the limited amount of land at the current site, expansion of some services might require reducing the capacity of others. Finally, owing to in- creased competition and growth downtown, was now the time to open a facility to serve that market? A new facility would take 6 months to renovate, and the nancial resources were not available to do both. New downtownfaciw? Fitness Plus is thoroughly investigating the option of opening a new facility downtown. Doing so would be an aggressive capacity expansion strategy, opening up new markets when competition is increasing at the original facility. This strategy would enable Fitness Plus to expand its market area, but may not help the overcrowding at the current facility. There are several uncertainties as to future costs, customer demands, and strategies of competitors. It also will take some time to bring the new capacity on line. However, the resurgence in activity downtown makes this option worth more careful analysis. Fitness Plus can lease a facility at $8 per square feet at a new downtown location. It would be very accessible to the new oces and businesses that are moving back into downtown. The lot is sufciently large to handle a full-service club comparable in size with the original facility, with ample room for parking. It would probably take about one year before nancing could be arranged, the workforce hired and trained, and the facility open to customers. The new facility would have 8,000 square feet, without further expansion. Either new or used Nautilus and cardiovascular equipment can be purchased for the new facility. Buying the full complement (53 machines) of equipment currently at the original facility would be $160,000 new, and only $80,000 used. However, there is a concern that a brand new facility furbished with used equipment would not project a good image, and that membership might be adversely affected. The initial investment in carpeting (and rubber matting just for the weight lifting area) would cost a total of $16 per square yard for the whole facility. Annual costs would include $120,000 for salaries and wages, $25,000 for insurance and liability, $2,400 for maintenance, and $20,000 for electricity