Question

Mountaintop golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $47,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $20,000,000 for the golfing season. About 440,000 golfers are expected each year. Variable costs are about $17 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

Answer 1

Answer:

47.4%

Explanation:

A. Expected golfers

440,000

B Revenue (440,000 × $84)

$36,960,000

C. Variable cost (440,000 × $17)

$7,480,000

D = B - C Contribution margin

$29,480,000

E Fixed cost

$20,000,000

F = D - E Profit

$9,480,000

G Assets

H = F/G × 100 Return on assets

47.4%