Question

You are planning to open a local restaurant, and you are considering whether to buy or rent your facility. If you rent the facility, you will pay $2,500 per month in rent plus approximately $1,300 in utilities per month. You will also be required to purchase renters' Insurance, which will cost you $350 per month. All maintenance fees on the building and landscaping, however, will be provided by the property owner. If you buy the facility, your mortgage will be $1,800 per month, and utilities will be $1,300 per month. Your property insurance will be $600 per month and your expected maintenance costs are $1.000 per month. What is the relevant cost of purchasing the building? a) $2,850 per month b) $4,700 per month c) $3.400 per month d) $4,150 per month

Answer 1

The relevant cost of purchasing the building is $4,700 per month.

Step-by-step explanation:

To determine the relevant cost of purchasing the building, we need to compare the total monthly costs of renting and buying. For renting, we add the monthly rent, utilities, and renters' insurance, which amounts to $2,500 + $1,300 + $350 = $4,150 per month. For buying, we add the monthly mortgage, utilities, property insurance, and maintenance costs, which amounts to $1,800 + $1,300 + $600 + $1,000 = $4,700 per month. Therefore, the relevant cost of purchasing the building is $4,700 per month.

Answer 2

The relevant monthly cost of purchasing the building is $4,700, which includes mortgage, utilities, property insurance, and maintenance costs.

Step-by-step explanation:

To calculate the relevant cost of purchasing the building, we must add up the monthly mortgage, utilities, property insurance, and maintenance costs. So, the calculation would be:

• Mortgage: $1,800 per month
• Utilities: $1,300 per month
• Property Insurance: $600 per month
• Maintenance: $1,000 per month

Adding these amounts together, we find that the monthly cost of purchasing the building is:

$1,800 (Mortgage) + $1,300 (Utilities) + $600 (Property Insurance) + $1,000 (Maintenance) = $4,700 per month

Therefore, the correct answer is b) $4,700 per month.