Question

John has an extra bedroom in his house that he occasionally rents out using the service Airbnb. John charges​ $100 per​ night, and his room is occupied by a renter approximately 100 nights per year. He thinks that if he repaints the room the photos he posts on Airbnb to draw customers will be more​ attractive, allowing him to charge​ $110 dollars per night and to rent the room for 120 nights per year.​ John's tax rate is​ 28%. What is the​ annual, afterdash​tax, incremental revenue that John expects from his painting​ project?

Answer 1

Answer:

C. $2304

Explanation:

The annual, after-tax, revenue is:

$100 × 100 nights = 10000.

The tax rate is 28% of 10000 : 0.28 of 10000

Therefore 0.28 × 10000 = 2800.

Revenue = 10000 - 2800 =7200

The annual, after-tax, incremental revenue is:

$110 ×120 nights = 13200.

The tax rate is 28% of 13200 : 0.28 of 13200

Therefore 0.28 × 13200 = 3696

Incremental revenue = 13200 - 3696 = 9504

Then, the subtract the initial revenue from the new revenue.

9504 - 7200 = 2304

Therefore, the annual, after-​tax, incremental revenue that John expects from his painting project is $2304