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ID: 2516427 • Letter: L
Question
lype Microsoft Microsoft PDF File Microsoft PDF File Microsoft XPS Docu Shortcut Microsoft Microsoft 8. Mountaintop golf course is planning for the coming season. Investors would like to eam a 12% return on the company's $45,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $24,000,000 for the golfing season. About 430,000 golfers are expected each year. Variable costs are about $16 per golfer. Mountaintop golf course is a price-taker and won't be able to charge more than its competitors who charge $104 per round of golf. What profit will it earn as a percent of assets? A-Profit of 145.73% BLoss of 100 6396 C.Loss of 30.76% D-Profit of 3076% C
Explanation / Answer
Total variable costs = 430,000 golfers*$16 per golfer = $6,880,000
Fixed costs = $24,000,000
Thus total costs = fixed costs+variable costs = 24,000,000+6,880,000 = $30,880,000
Total revenue = 430,000 golfers*$104 per golfer = $44,720,000
Thus profits = revenue – cost
= $44,720,000 - $30,880,000
= $13,840,000
Profit as a % of assets = profit/assets*100
= 13,840,000/45,000,000*100
= 30.76%
Thus the answer is option “d” – profit of 30.76%
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