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 as a percent of assets?

Question

Quizplus · Accepted Answer

Profit = (Price per round - Variable cost per round) * Number of rounds - Fixed costs= ($75 - $20) * 400,000 - $15,000,000= $23,000,000Profit as a percent of assets = (Profit / Assets) * 100= ($23,000,000 / $40,000,000) * 100= 57.50%

Green Pastures Golf Course Is Planning for the Coming Season