You have invested $100,000 in a badly built house. For $20,000 invested today, you can fix...

  

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You have invested $100,000 in a badly built house. For $20,000 invested today, you can fix up the house and sell it 1 year from today for $90,000. As an alterna- tive, you can sell the house today for $60,000. a. Should you take into account the $100,000 cost already invested in the house? b. If the relevant discount rate is 9%, which alternative should you prefer? c. What is the discount rate that makes you indifferent between the two alternatives? You have invested $100,000 in a badly built house. For $20,000 invested today, you can fix up the house and sell it 1 year from today for $90,000. As an alterna- tive, you can sell the house today for $60,000. a. Should you take into account the $100,000 cost already invested in the house? b. If the relevant discount rate is 9%, which alternative should you prefer? c. What is the discount rate that makes you indifferent between the two alternatives?

Answer rating: 100% (QA)

a No the 100000 cost already invested in the house should not be taken into account when evaluating ... View the full answer