Steve Denmark owns his own taxi, for which he bought an $18,000 permit to operate two years

Question:

Steve Denmark owns his own taxi, for which he bought an $18,000 permit to operate two years ago. Mr. Denmark earns $36,000 a year operating as an independent but has the opportunity to sell the taxi and permit for $73,000 and take a position as dispatcher for Sartino TaxiCo. The dispatcher position pays $31,000 a year for a 40-hour week. Driving his own taxi, Mr. Denmark works approximately 55 hours per week. If he sells his business, he will invest the $73,000 and can earn a 10 percent return.

Required

a. Determine the opportunity cost of owning and operating the independent business.

b. Based solely on financial considerations, should Mr. Denmark sell the taxi and accept the position as dispatcher?

c. Discuss the qualitative as well as quantitative factors that Mr. Denmark should consider.


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,...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: