Green Pastures golf course is planning for the coming season.Investors would like to earn a 10% return on the company's $40 million of assets.The company primarily incurs fixed costs to groom the greens and fairways.Fixed costs are projected to be $15,000,000 for the golfing season.About 400,000 golfers are expected each year.Variable costs are about $20 per golfer.
-The Green Pastures golf course is a price-taker and won't be able to charge more than its competitors who charge $75 per round of golf.What profit will it earn in terms of dollars?

Question

Quizplus · Accepted Answer

The correct answer is A.The profit will be $7,000,000.The total revenue is 400,000 * $75 = $30,000,000.The total cost is $15,000,000 + 400,000 * $20 = $23,000,000.The profit is $30,000,000 - $23,000,000 = $7,000,000.

Green Pastures Golf Course Is Planning for the Coming Season