See the Winter Sports Inc. data from S8-2. Assume that Winter Sports' reputation has diminished and other resorts in the vicinity are charging only $65 per lift ticket. Winter Sports has become a price-taker and won't be able to charge more than its competitors. At the market price, Winter Sports' managers believe they will still serve 750,000 skiers and snowboarders each season .

1. If Winter Sports can't reduce its costs, what profit will it earn? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? Show your analysis.

2. Assume that Winter Sports has found ways to cut its fixed costs to $30 million. What is its new target variable cost per skier/snowboarder? Assume investors want to earn a 15% return on assets. Compare this to the current variable cost per skier/ snowboarder. Comment on your results.