My son, age 13, has a lawn-mowing business with 10 customers. For each customer, he cuts...
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My son, age 13, has a lawn-mowing business with 10 customers. For each customer, he cuts the grass 3 times a year, which earns him $50 for each mowing. He has just paid $200 for a new mower. The maintenance and operating cost of the mower is $120 for the first year in service, and increases by 20% a year thereafter. A 1-year-old mower has a resale value of $150, which decreases by 10% a year thereafter. My son, who plans to keep his business until he is 16, thinks that it is more economical to buy a new mower every 2 years. He bases his decision on the fact that the price of a new mower will increase only by 10% a year. Is his decision justified? My son, age 13, has a lawn-mowing business with 10 customers. For each customer, he cuts the grass 3 times a year, which earns him $50 for each mowing. He has just paid $200 for a new mower. The maintenance and operating cost of the mower is $120 for the first year in service, and increases by 20% a year thereafter. A 1-year-old mower has a resale value of $150, which decreases by 10% a year thereafter. My son, who plans to keep his business until he is 16, thinks that it is more economical to buy a new mower every 2 years. He bases his decision on the fact that the price of a new mower will increase only by 10% a year. Is his decision justified?
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Answer rating: 100% (QA)
The decision is not justified as the profit will go down if the mower is b... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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