Question

6.42 You are considering developing an 18-hole championship golf course that requires an investment of $20,000,000. This investment cost includes the course development, club house, and golf carts. Once constructed, you expect the main- tenance cost for the golf course to be $650,000 in the first year, $700,000 in the second year and continue to increase by $50,000 in subsequent years. The net venue generated from selling food and beverage will be about 15% of greens Pald by the players. The cart fee per player is $15, and 40,000 rounds of are expected per vear. You will own and operate the course complex for years and expect to sell it for $25,000,000. What is the greens fee per round

Answer 1

We can solve this as follows. The green fee per player for first year (growing at 15% every year) comes to $18.65

Time	Investment	Salvage	No. of rounds per year	No. of players per year	Maintenance	Cart Fee	Green Fee per player	Total Green Fee	Food & Beverage	Total Cash Flow	Discounted Value of CF
	A	B	C	D = 2C	E	F = 15*D	G	H = G*D	I = 15% of H	J = A+B+E+F+H+I	K = J / 1.15^t
0	-20000000			0						-20000000	-20000000
1			40000	80000	-650000	600000	18.65	1492029	223804	1665834	1448551
2			40000	80000	-700000	600000	21.45	1715834	257375	1873209	1416415
3			40000	80000	-750000	600000	24.67	1973209	295981	2119190	1393402
4			40000	80000	-800000	600000	28.36	2269190	340379	2409569	1377679
5			40000	80000	-850000	600000	32.62	2609569	391435	2751004	1367735
6			40000	80000	-900000	600000	37.51	3001004	450151	3151155	1362331
7			40000	80000	-950000	600000	43.14	3451155	517673	3618828	1360451
8			40000	80000	-1000000	600000	49.61	3968828	595324	4164152	1361269
9			40000	80000	-1050000	600000	57.05	4564152	684623	4798775	1364111
10		25000000	40000	80000	-1100000	600000	65.61	5248775	787316	30536091	7548055
											0