Moving to another question will save this response 14 of 2 The owners have $7 ra

Question

Moving to another question will save this response 14 of 2 The owners have $7 rate is 34%. Calculate the following: invested n an 80-room motel and the owners want an after tax return on their investment of 10%. Occupancy is expected to be 75%inthe c) Income tax:$ a) Return on investment (AT): $78,800 b) Operation income: 119.394 a) Return on investment uAn $78,000 b) Operation income: $118,182 Income tax: $40,182 a) Return on investment (AT): $78,080 bi Operation income S118,303 c) Income tax: $40,223

Explanation / Answer

a) Return on Investment after tax = $780,000 x 10%

......................................................= $78,000

c) Income tax = [$78,000 / (1 - 0.34)] x 34%

.......................= $40,182

b) Operating Income = Return on Investment after tax + Income tax

..................................= $78,000 + $40,182

...................................= $118,182

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