1. As part of an estate settlement Mary received $1 million. She decided to use the money...
Question:
1. As part of an estate settlement Mary received $1 million. She decided to use the money to purchase a small business in Wichita. If Mary would have invested the $1 million in a risk-free bond fund she could have earned $50,000 each year. She also quit her job with Lucky.Com Inc., which paid her a salary of $42,000 per year, to devote all of her time to her new business. Before Mary started the business, she took a vacation trip to New York City, which cost her $3,000, and she used funds she had in her bank account from before her estate settlement to pay for the trip.
a. (10 points) Identify each of the costs that Mary should be considered opportunity costs to Mary for starting and operating her new business (no calculation required for part a)?
b. (10 points) Calculate Mary’s economic costs of for starting and operating her new business in its first year?
Introduction to Management Science A Modeling and Cases Studies Approach with Spreadsheets
ISBN: 978-0078024061
5th edition
Authors: Frederick S. Hillier, Mark S. Hillier