WinterParadise operates a Rocky Mountain ski resort. The company is planning its lift ticket pricing for the coming ski season. Investors would like to earn a 15% return on the company's $100 million of assets. The company incurs primarily fixed costs to groom the runs and operate the lifts. WinterParadise projects foxed costs to be $33.750.000 for the ski season. The resort serves about 750,000 skiers and snowboarders each season. Variable costs are $10 per guest. The resort had such a favorable reputation among skiers and snowboarders that it had some control over the lift ticket prices Assume that Winter Paradise's reputation has diminished and other resorts in the vicinity are charging only $65 per in ticket. Winter Paradise has become a price-taker and won't be able to charge more than its competitors. At the market price, Winter Paradise's managers believe they will still serve 750.000 skiers and snowboarders each season Read the requirements! 1. If WinterParadise can't reduce its costs, what profit will it ear? State your answer in dollars and as a percent of assets. Will investors be happy with the profit level? Show your analysis Complete the following table to calculate WinterParadise's projected income and excess profit or shortfall. (Use parentheses or a minus sign to show a profit shortfall.) Revenue at market price Less: Total costs Operating income Compared to the desired operating income of Expected excess profit (profit shortfall) (Round the percentage to the nearest hundredth percent, X.XX%.) As a percentage of assets, Winter Paradise's projected profit is %. Will investors be happy with this profit level? (1) Stock prices (2) 2. Assume that Winter Paradise has found ways to cut its fixed costs to $30 million. What is its new target variable cost per sker/snowboarder? Compare this to the current variable cost per sker/snowboarder. Comment on your results. Complete the following table to calculate Winter Paradise's new target variable cost per customer. (Round your final answer to the nearest cent.) (3) Loss (4) (5) Less (6) Target total variable costs Divided by: (7) Target variable cost per skier / snowboarder This target variable cost is (8) - this target since it is (10) the current variable cost of $10. WinterParadise (9) the current variable cost 1: Requirements 1. If Winter Paradise can't reduce its costs, what profit will it eam? 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 Paradise has found ways to cut its fixed costs to $30 million. What is its new target variable cost per skier/snowboarder? Compare this to the current variable cost per skier/snowboarder. Comment on your results (1) O O No, because the expected return on assets is greater than the desired return on assets. No, because the expected return on assets is less than the desired return on assets Yes, because the expected return on assets is greater than the desired return on assets. Yes, because the expected return on assets is less than the desired return on assets. O (2) O may decline as a result. O may increase as a result. (3) O O Desired profit O Number of skiers / snowboarders Reduced level of fixed costs O Revenue at market price O Target revenue Target total costs Target total variable costs (4) O O Desired profit Number of skiers / snowboarders O Reduced level of fixed costs O Revenue at market price Target revenue Target total costs Target total variable costs (5) O O Desired profit Number of skiers / snowboarders O Reduced level of fixed costs O Revenue at market price O Target revenue Target total costs Target total variable costs (6) O Desired profit Number of skiers / snowboarders Reduced level of fixed costs O Revenue at market price Target revenue Target total costs Target total variable costs (7) O Desired profit Number of skiers / snowboarders O Reduced level of fixed costs Revenue at market price Target revenue Target total costs O Target total variable costs (8) O almost equal to O approximately 50% O approximately two times (9) O O may have a difficult time achieving should easily be able to achieve (10) O O so much lower than so much greater than somewhat equal to