Ernie McNaire's has just made the final payment on his mortgage. He could continue to live in

Question:

Ernie McNaire's has just made the final payment on his mortgage. He could continue to live in the home; cash expenses for repairs and maintenance (after any tax effects) would be $750 monthly. Alternatively, he could sell the home for $490,000 (net of taxes), invest the proceeds in 3% municipal tax-free bonds, and rent an apartment for $18,000 annually. The landlord would then pay for repairs and maintenance.

Prepare two analyses of McNaire’s alternatives, one showing no explicit opportunity cost and the second showing the explicit opportunity cost of the decision to hold the present home.

Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...