Burr Hill golf course is planning for the coming season. Investors would like to earn a 10% return on the company's $50 million of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $25 million for the golfing season. About 500,000 golfers are expected each year. Variable costs are about $10 per golfer. The Burr Hill course has a favourable reputation in the area and therefore, has some control over the price of a round of golf.
Required:
1. What are Burr Hill's total costs?
2. What is Burr Hill's target revenue?
3. What will Burr Hill's revenue be at a market price of $65/round?
4. What will Burr Hill's expected profit shortfall be if it charges $65/round?

Question

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The Answer of Burr Hill golf course is planning for the coming season. Investors would like to earn a 10% return on the company's $50 million of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $25 million for the golfing season. About 500,000 golfers are expected each year. Variable costs are about $10 per golfer. The Burr Hill course has a favourable reputation in the area and therefore, has some control over the price of a round of golf.
Required:
1. What are Burr Hill's total costs?
2. What is Burr Hill's target revenue?
3. What will Burr Hill's revenue be at a market price of $65/round?
4. What will Burr Hill's expected profit shortfall be if it charges $65/round?

Burr Hill Golf Course Is Planning for the Coming Season