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

question 208

Multiple Choice

Use the information below to answer the following question(s) :
Rosemont Tennis is planning for the coming year. Investors would like to earn a 12% return on the company's $25 million of assets. The company primarily incurs fixed costs to maintain the tennis courts. Fixed costs are projected to be $12,500,000 for the year. About 500,000 court time hours are expected to be played each year. Variable costs are about $5 per hour of court time.
-If Rosemont Tennis is a price-taker and won't be able to charge more than its competitors who charge $32.50 per hour of court time. What profit will it earn in terms of dollars?

• A) $1,250,000
• B) $(12,500,000)
• C) $6,250,000
• D) $(1,250,000)

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Definitions:

Fire Damages

Destruction or damage inflicted to property, goods, or assets due to fire.

Insurance Money

Funds received from an insurance company either as a claim settlement or benefit payment.

Short-rate Penalty

A Short-rate Penalty is a fee charged to policyholders who cancel their insurance policy before it expires, calculating the refund using a method that is less favorable than pro-rata.

Annual Premiums

The amount paid on an annual basis for insurance coverage, which can pertain to various types of insurance policies.