Mountaintop golf course is planning for the coming season. Investors would like

Question

Mountaintop golf course is planning for the coming season. Investors would like to earn a? 12% return on the? company's $ 45 comma 000 comma 000 of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $ 24 comma 000 comma 000 for the golfing season. About 400 comma 000 golfers are expected each year. Variable costs are about $ 16 per golfer. Mountaintop golf course has a favorable reputation in the area and? therefore, has some control over the price of a round of golf. Using a costminusplus ?approach, what price should Mountaintop charge for a round of? golf?

Explanation / Answer

Return required per golfer = (45000000*12%)/400000= $13.5 Price to be charged = 13.5+16+(24000000/400000)= $89.5

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