Two years ago, Lance Allgood bought a truck for $28,000 to offer delivery services. Lance earns $32,000 a year operating as an independent trucker. He has an opportunity to sell his truck for $15,000 and take a position as an instructor in a truck driving school. The instructor position pays $25,000 a year for working 40 hours per week. Driving his truck, Lance works approximately 60 hours per week. If Lance sells his truck, he will invest the proceeds of the sale in bonds that pay a 12 percent return.

a. Determine the opportunity cost of owning and operating the independent delivery business.
b. Based solely on financial considerations, should Lance sell his truck and accept the instructor position?
c. Discuss the qualitative as well as quantitative characteristics that Lance should consider.

  • CreatedFebruary 07, 2014
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