Burr Hill golf course is planning for the coming season. Investors would like to earn a 10% return on the company's $50,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $25,000,000 for the golfing season. About 500,000 rounds of golf are expected to be played each year. Variable costs are about $10 per round of golf.
-The Burr Hill golf course is a price-taker and won't be able to charge more than its competitors, who charge $65 per round of golf. What profit will it earn in terms of dollars?

Question

Burr Hill golf course is planning for the coming season. Investors would like to earn a 10% return on the company's $50,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $25,000,000 for the golfing season. About 500,000 rounds of golf are expected to be played each year. Variable costs are about $10 per round of golf. 
-The Burr Hill golf course is a price-taker and won't be able to charge more than its competitors, who charge $65 per round of golf. What profit will it earn in terms of dollars?

Quizplus · Accepted Answer

A) Calculations:
500,000 × $65 = $32,500,000
$25,000,000 + (500,000 × $10) = $30,000,000
$32,500,000 - $30,000,000 = $2,500,000

Burr Hill Golf Course Is Planning for the Coming Season