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 $22,000,000 for the golfing season. About 400,000 golfers are expected each year. Variable costs are about $20 per golfer Mountaintop golf course is a price-taker and won't be able to charge more than its competitors who charge $84 per round of golf. What profit will it earn as a percent of assets? O A. Loss of 142.86% OB. Profit of 160% OC. Profit of 7.5% OD. Loss of 7.5%

Answer 1

Expected Revenue	33600000	=400000*84
Less: Costs
Variable costs	8000000	=400000*20
Fixed costs	22000000
Total Costs	30000000
Expected income	3600000
Expected income	3600000
Divide by Total assets	48000000
Profit as a percent of assets	7.5%
Option C Profit of 7.5% is correct