Question

Mountaintop golf course is planning for the coming season. Investors would like to earn a​ 12% return on the​ company's

$48,000,000

of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be

$23,000,000

for the golfing season. About

450,000

golfers are expected each year. Variable costs are about

$16

per golfer. Mountaintop golf course is a

priceminus−taker

and​ won't be able to charge more than its competitors who charge

$125

per round of golf. What profit will it earn as a percent of​ assets?

A.Loss of

85.33​%

B.Loss of

54.27​%

C.Profit of

158.94​%

D.Profit of

54.27​%

Answer 1

Correct answer---- (D).Profit of 54.27​%

A	Expected golfers	450000
B	Revenue (450000 x $125)	$ 5,62,50,000.00
C	Variable cost (450000 x 16)	$      72,00,000.00
D=B-C	Contribution margin	$ 4,90,50,000.00
E	Fixed cost	$ 2,30,00,000.00
F=D-E	Profit	$ 2,60,50,000.00
G	Assets	$ 4,80,00,000.00
H=F/G x 100	Return on assets	54.27%