#15 Mountain to gol course is planning or the coming season nvestors would like

Question

#15

Mountain to gol course is planning or the coming season nvestors would like o eam a 12% re m on e on any's S4 000 0 0 o assets. The company p man yin us fxed costs o groom e geens and ta ays e costs are roject d to be $21,000,000 for the golfing season. About 430,000 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 $99 per round of golf. What profit will it ean as a percent of assets? A. B. ° C. O D. Loss of 112.76% Profit of 29.71% Profit of 169.55% Loss of 29.71%

Explanation / Answer

C. Profit of 29.71% $ Sales revenue (430000*99) 42570000 Variable costs (430000*17) 7310000 Contribution margin 35260000 Fixed costs 21000000 Net income 14260000 Total assets 48000000 Profit as a percentage of assets (14260000/48000000) 29.71%

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