Calculate roi and residual income for each hotel and explain

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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: EM132713785

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