Based on the given data, Tom's leveraged return on the real estate investment is 13.3%.
A leveraged return means an investment return on equity partially financed with debt.
Investment in property = $100,000 - $60,000
Investment in property = $40,000
Interest = $60,000 * 4%
Interest = $2,400
Net income after tax = ($10,000 - $2,400) * (1 - 30%)
Net income after tax = $7,600 * 0.70
Net income after tax = $5,320
Leveraged return = Net income after tax / Investment in property * 100
Leveraged return = $5,320 / $40,000 * 100
Leveraged return = 0.133 * 100
Leveraged return = 13.3%
Hence, Tom's leveraged return on the real estate investment is 13.3%.
Learn more about leveraged return:
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