Question

Mountaintop golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $47,000,000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $22,000,000 for the golfing season. About 420,000 golfers are expected each year. Variable costs are about $17 per golfer. The Mountaintop golf course is a price-taker and won't be able to charge more than its competitors who charge $79 per round of golf. What profit will it earn in terms of dollars

Answer 1

$4,040,000

Step-by-step explanation:

Total variable cost = $17 × 420,000 = $7,140,000

Total fixed cost = $22,000,000

Total cost = Total variable cost + Total fixed cost = $7,140,000 + $22,000,000 = $29,140,000

Total revenue = $79 × 420,000 = $33,180,000

Profit = Total revenue - Total cost = $33,180,000 - $29,140,000 = $4,040,000

Therefore, Mountaintop golf will earn $4,040,000 profit.