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Calculate the roi and residual income for each hotel

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Reference no: EM132709633

There are two different hotel chains that you have identified as potential investment opportunities. You are looking for a minimum required rate of return of 8 per cent. As a starting point, you have accumulated some basic information to calculate the return on investment and residual income.

                                        Hotel Aster                Hotel Bella
Sales                       $10 000 000                $6 000 000

Net operating income        200 000                    300 000

Average operating assets 2 000 000                  3 000 000

Required:

Problem 1: Calculate the ROI and residual income for each hotel. Explain the meaning of your calculations.

Reference no: EM132709633

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