A family that enjoys outdoor activities can purchase a small run-down cabin in a desirable mountain location
Question:
A family that enjoys outdoor activities can purchase a small run-down cabin in a desirable mountain location for $6,000. To make it livable they will have to repair the roof and construct a new outhouse at a cost of $1,800 for materials and transportation. If the cabin is to be usable for skiing in the winter, they will have to add a fireplace or stove and insulation that will cost at least $2,000. Other annual expenses for electricity, taxes, maintenance etc. will amount to $550. They expect to own the cabin 5 years before a job transfer will force them to sell it. Assuming that the repairs are done at once, heating arrangements are added by the end of the second year, and the cabin can be sold for $7,000, determine how much the family could afford to spend each year for other outings in place of going to their cabin. Their savings earn 7%. What intangible factors might affect their decision to buy the cabin?
Thermodynamics for Engineers
ISBN: ?978-1133112860
1st edition
Authors: Kenneth A. Kroos, Merle C. Potter