Use the Information Below to Answer the Following Question(s)

question 62

Multiple Choice

Use the information below to answer the following question(s) :
Mountaintop golf course is planning for the coming season. Investors would like to earn a 12% return on the company's $45 million of assets. The company primarily incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $20,000,000 for the golfing season. About 400,000 golfers are expected each year. Variable costs are about $15 per golfer.
-If the Mountaintop 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?

• A) $16,000,000
• B) $(4,000,000)
• C) $4,000,000
• D) $(20,000,000)

---

Definitions:

Income Tax Expense

The amount of income taxes a company expects to pay for the current tax year, accounting for deferred taxes.

Book Income Before Income Tax

The income that a company reports on its financial statements before the deduction of income tax expenses.

Tax Depreciation

The depreciation expense allowed by tax authorities to account for the reduction in value of a tangible asset over its useful life, intended to provide a tax shield for businesses.

Book Depreciation

The portion of an asset's initial cost that is allocated as an expense over its useful life on the financial statements, according to accounting standards.